Badenoch’s latest UK trade figure announcement requires more cautious reading, writes Bremain Vice Chair Lisa Burton for Yorkshire Bylines.
The Conservatives cannot be trusted to provide accurate information without skewing data, misleading comparisons, or indulging in some Trumpian ‘alternative facts’, particularly in their denial of Brexit damage. Kemi Badenoch’s latest trade figure announcement continues this trend.
After Badenoch announced impressive trade figures and other stats, Brexiters latched onto them as proof that Brexit is, and has been, a roaring success. But are all these figures an accurate and fair indication of the economic and trade situation, and do they prove Brexit success?
Fourth biggest exporter in the world?
Badenoch’s overall quoted figures in the above graphic are a mixture of 2022 and 2023 results. She stated in parliament that the UK was the fourth largest exporter in 2022. To conflate and make fact-checking harder, the sum of £862bn in trade is from a different year, ending Feb 2024.
Why do this? In 2022, sums were inflated by a rise in oil and gas import and export prices, due to the Ukraine war as well as inflation. Her figure was not adjusted for inflation and precious metal trades, which would be standard for making long-term comparisons.
The ONS’s 2023 trade data show that UK trade was much more stable in 2023 than in 2022. If you only look at the top-line figure, it seems like an increase in trade. However, once adjusted for inflation, total goods exports (not services) fell in 2023 by £15.2bn (4.6%) compared with 2022, with substantial decreases in exports to the EU and non-EU countries.
Compared with 2018 (the last stable period), total goods exports fell by £44.7bn (12.4%). In comparison, the rest of the G7 were up 5%. Without Brexit, we could safely assume that goods exports would have risen in line with the rest of the G7 and be around 17% higher than where they are. Now, that would have been a success story!
Looking at trade in goods for 2023, we see a very different worldview.
Leading the world in services?
The UK has a robust service industry and history of service exports. Most export growth mentioned came from financial services, insurance, travel, telecommunications and computer and information services. They have continued to do well since Brexit because, unlike trade in physical goods, most services are delivered digitally, for example, selling an insurance policy to someone or a company abroad. Services don’t have to navigate the same barriers that Brexit erected by adhering to strict customs rules with the products crossing a physical border. It makes sense they would be less affected by Brexit than other sectors.
Leading the world though? With $929bn worth of services sold internationally in 2022, the United States of America remained the world’s leader. The UK was second, by some distance, at $494bn. Still, considering the difference in the size of economies, this an impressive figure, albeit despite Brexit and Conservative policy.
£862bn in exports?
Not quite. The biggest issue with Badenoch’s figures of £862bn in the government’s report is that it has not been adjusted for inflation, which is standard for analysing long-term flows. The data she uses for the report from the Department of Business and Trade for the government document clearly states: “Unless otherwise stated, all figures are reported in nominal (current prices) and have not been adjusted for inflation. Accurate estimates (Chained Volume Measures) take into account inflation.”
Badenoch used the below graph to highlight the £862bn figure but after removing the effects of inflation, total annual UK exports of combined goods and services were £690.8bn in 2023, but hey, what’s a mere £172bn between friends?
In July 2023, the UK signed an agreement (not a trade deal) to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – an Asia-Pacific trade bloc of 11 countries. This agreement is not yet in force for the UK. While it is good for cooperation and relations, the government has severely overegged this one, too.
Estimates show a mere £2bn boost to trade by 2040, less than 0.07% of UK GDP, mainly because the country already has FTAs with most CPTPP partners.
The UK has also signed digital trade agreements with Singapore and Ukraine; these are not considered ‘free trade agreements’.
To cut through the jargon – If we add up the impact of all the current FTAs and, for good measure, throw in the two big ones the Conservatives want with India and the USA, it would only give the UK a total boost of around 1% of GDP by 2040. This is a tiny amount compared with the already incurred loss of around 5% in GDP due to leaving the EU.
This video was taken before NZ deal came into force and this man is celebrating a false Brexit benefit.
We have always had nZ produce on our shelves, that Brexit opened up 🇬🇧market to countries which have lower standards than Britain is a betrayal of Tory manifesto pledge. Also… https://t.co/1qbLnB25DD
— Liz Webster (@LizWebsterSBF) September 3, 2023
It feels slightly contemptuous, assuming the public won’t know the difference, so why? Could it have something to do with the fact that last year Badenoch made a speech and came up with the plan called ‘Race to a Trillion’? £1tn in exports by 2030. So, if that’s her plan, which sounds better? £862bn, or £690bn. I think we have our answer.
73 trade deals agreed?
We often hear the government boasting of a new trade deal, but how good are they? Who benefits?
Of the 71 free trade agreements (FTAs) or trade deals the UK has signed since leaving the EU, 68 are rollover deals identical to those the UK had with those countries when it was inside the single market.
The UK has signed three new trade agreements since leaving the EU: with Australia, New Zealand and Japan. The National Farmers’ Union has strongly criticised the outcomes of the deals with New Zealand and Australia for their long-term effect on sectors like British beef and lamb, dairy and horticulture, saying “there appears to be little in those trade deals to benefit British farmers”. British farmers feel betrayed by their government and all for a cheap, quick Brexit success headline. Even New Zealand sees this.
Highest FDI (foreign direct investment) stock in Europe?
London remains a global financial powerhouse, and I’d love to break this down more. Still, after researching thoroughly, I found that the figure is too ambiguous and lacks details on what it supposedly represents. The only statistics I could find for the inward ‘stock’ of FDI were from 2022, and the Netherlands pipped the UK for the top place. If this applies solely to the UK’s FDI ‘stock market value’, and is for 2023, it could be correct.
Regarding FDI, France is first and has been for several years. In 2023, the UK was second, with Germany third. In 2022, the UK was third after France and Italy for inward FDI and second after Germany in outward FDI
80,000 jobs from 1600 FDI projects?
As noted above, France received the highest number of FDI projects at 1,194. The UK received 985 FDI projects in 2023, down 6% from 2022. Badenoch’s figures of 1600 FDI projects with 80,00 jobs created are amalgamated over a two-year period – certainly not a usual way of presenting figures.
The UK has done well overall on FDI investment, but the graph regarding general business investment shows a different story. Brexit has diminished confidence in the UK for businesses, making it much harder for them to plan ahead, which has led to this decline.
Faster growing economy than Germany, Italy and Japan?
In 2020, the UK was the worst-performing economy in the G7, seeing a 10.36% drop. The UK was the only country to drop double digits, which was one of the reasons its bounce back was also the highest in 2021, with an 8.68% lift. The UK also did well in 2022, when fuel prices and inflation were volatile. In 2023, however, only Germany had lower growth; this year, it looks the same. Looking at the graph below, the government is a little picky with its story by focusing on specific years only, not the overall picture or one available now.
Higher employment than in the USA, France or Italy?
This is a half-truth. In the case of France and Italy, yes, but not the USA. In 2023, the annual unemployment rate in the UK was 3.9%. The national unemployment rate in the USA in 2022 and 2023 was less than 3.6%. The UK is expected to see a rise in unemployment to 4.4% this year.
500 trade barriers removed?
Finally, here is a beautiful example of Tory doublespeak. They mean they have eliminated tariffs or allowed access to certain products to/from other marketplaces. Some examples given are:
- Selling new medicines and medical devices to South Africa.
- Cutting red tape for British pharma companies has also already led to £17mn of new business secured in Colombia.
UK-qualified professionals, including architects and auditors, will not have to fully requalify to work in Switzerland. Before Brexit, UK professional qualifications were mutually recognised across the EU member states. Since Brexit, they are not and have to be negotiated with individual countries, putting many UK professionals at a significant disadvantage to their European counterparts.
Rejoicing about removing trade barriers while completely ignoring that by leaving the EU, we erected trade barriers with our closest and largest trading bloc, adding mountains of paperwork, red tape and costs seems oxymoronic.
Small and medium-sized businesses, in particular, are struggling. In 2023, 45% of SMEs said it’s getting harder to trade in goods with the EU compared with 36% one year earlier, with a similar rise for SMEs selling services (43%, previously 34%). Large corporations and manufacturers can adapt and swallow these costs, but smaller businesses cannot, stifling growth and productivity.
Summary
Since Brexit, the UK’s ‘trade intensity’ (trade as a proportion of GDP) has fallen significantly, considerably more than other advanced economies. The UK economy has grown in some aspects, but not as much as it would have if we were still part of the European Union. Hence, any good news is despite Brexit, NOT because of Brexit. The graph below shows where the UK would have been without the Brexit effect.
In her words, Badenoch used these numbers to “confirm that the strategy the public voted for on 23 June 2016 is delivering. Leaving the European Union was a vote of confidence, and we are seeing the results”. For her to say so is profoundly flawed and categorically wrong.
With the cost-of-living crisis, crumbling services, rising costs and wage stagnation, the British public sees and feels a different reality to the sunlit uplands Badenoch and the Conservative party portray. “The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command.” Luckily, the majority of the British people are not quite there yet.
