Half of UK firms expect post-Brexit disruption - GulfToday

Half of UK firms expect post-Brexit disruption

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The majority of British firms have faced disruption with trade with the European Union since Brexit, with many expecting the problem to last for some time, according to a survey published on Saturday.

A trade agreement between London and Brussels, which came into force on Jan. 1, has meant some companies have had to deal with new bureaucracy and rules.

The Survation survey for London First/EY, conducted in February, found 75% had experienced some disruption, even though 71% said they had felt prepared for the changes.

Almost half, 49%, said they expected that to continue in the long-term while nearly a third said they had stopped trading with the EU and countries not covered by rollover agreements.

The findings echo other surveys which indicate businesses have had difficulties with their supply chains, along with other border and regulatory matters, since the new trading arrangements came into operation. Prime Minister Boris Johnson has said the disruption is mainly due to “teething” problems which would ease as firms got to grips with the new system.

“It’s clear that the disruptions to UK trade with the EU go beyond teething problems with the new regime,” said John Dickie, Acting Chief Executive of London First.

“If the government is to champion Global Britain successfully, it must redouble its efforts to fix our trading relationship with the EU.” The survey of 1,040 businesses found 29% of firms reported their cost base had increased, with half of these businesses saying those costs would have to be passed on to customers.

However, 26% reported they had a better understanding of how to access new markets, and 24% saw the new trading arrangements as a chance to diversify their activities.

ECONOMIC GROWTH: Britain’s coronavirus-hammered economy grew more quickly than previously thought in the final three months of last year but still shrank by the most in more than three centuries in 2020 as a whole, official data showed recently.

The figures also revealed the biggest pile of household savings on record last year, which the Bank of England thinks will fuel a recovery when consumers are freed from lockdown.

Gross domestic product increased by 1.3% between October and December from the previous three-month period, the Office for National Statistics said.

Economists polled by Reuters had expected the growth rate to remain at the ONS’ preliminary 1.0% estimate.

In 2020, gross domestic product fell by 9.8% from 2019, only slightly less sharp than an initial estimate of a 9.9% slump.

Britain’s economy suffered the biggest drop of all countries in the Organisation for Economic Co-operation and Development except for Argentina and Spain last year, OECD data has shown.

It remained 7.3% smaller than before the pandemic, in inflation-adjusted terms, the second biggest drop among eight major economies listed by the ONS.

Although this partly reflects the way different countries produce the data, some of the weakness shown by Britain’s economy - particularly in household spending - was real.

After a rollercoaster 2020, when GDP careened 19.5% lower in the second quarter, during the first lockdown, and grew by almost 17% in the third, the BoE expects growth of 5% in 2021 as a whole, helped by Europe’s fastest vaccination programme.

A survey published earlier on Wednesday showed employers were much more confident about hiring staff.

Key to the recovery prospects will be the extent to which households spend savings they racked up while stuck at home. The savings ratio rose to 16.1% from 14.3% in the third quarter and for 2020 as a whole it hit a record high of 16.3%, compared with 6.8% in 2019, the ONS said.

Although this partly reflects the way different countries produce the data, some of the weakness shown by Britain’s economy - particularly in household spending - was real.

Samuel Tombs, an economist with Pantheon Macroeconomics, said the rise in savings might be offset by the hit to the value of shares held by investors.

“Households, therefore, likely will cling on to this cash, or top up their underperforming pensions, rather than spend it,” he said. The figures also showed growth in business investment which rose by 5.9% in the fourth quarter from the previous three months. But household spending fell by 1.7% and government spending, up by almost 7%, was the key support for the economy.

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