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UK exports to the EU collapsed by £20bn in the first full year after Brexit, official figures show, as businesses grappled with delays, extra costs and new red tape. Sales to the trading bloc fell much more sharply last year than exports to the rest of the world, the Office for National Statistics (ONS) reported. Exports to the EU crashed 12 per cent between January and December last year compared with 2018, while non-EU exports were down 6 per cent.Analysts said the UK continued to lag behind competitors, thanks in part to new trade barriers.Total exports fell by more than 10 per cent in Britain’s first year outside the single market compared to 2018 – the last period before Brexit and Covid-19 caused huge disruption to international trade. Imports from the EU also fell 17 per cent to £222bn – the lowest level in five years. The amount of goods bought from EU nations fell below imports from the non-EU countries for the first time since comparable records began in 1997.Meanwhile imports from non-EU countries rose from £206bn in 2020 to £254bn last year, the most on record.The trade deficit – the gap between imports and exports – is widening, and hit its highest point on record last year.The UK imported £15bn more in 2021 than it exported, an increase of 20 per cent on the year before and up significantly compared to previous years.Part of the reason for this yawning deficit is that UK services exports, once a powerhouse of economic growth, remain 4.6 per cent down on 2018 levels at £24.9bn.Further changes to the trading regime due to come in later this year threaten to cause more upheaval.From July there will be new physical checks on plants, health certificates will be needed for animal products and all imports will need safety and security declarations.James Smith, research director at the Resolution Foundation think tank, said: “While the economy is at pre-pandemic levels, UK trade continues to lag many of its main competitors. While Covid has undoubtedly damaged trade, so too has the introduction of fresh trade barriers with the EU.“As well as facing up to the cost of living challenge, the government also needs to redouble efforts to boost trade as part of a new economic strategy for the 2020s.” More

The government’s flagship levelling up policy risks failing Britain’s poorest by focusing on places, rather than poverty, a leading economic think tank has warned. Regional inequality is persistent and worsening the Institute for Fiscal Studies (IFS) said on Tuesday, in an analysis ahead of the government’s delayed policy white paper, expected this week. However, while places are at risk of losing out on economic growth and opportunities, some of the UK’s poorest people also live in the country’s wealthy regions. “It is really important to remember in all this that, while high paid jobs are unevenly spread, low paid jobs, and indeed poverty, are not,” said Paul Johnson, director of the IFS.“A higher fraction of London’s population is in poverty than in any other region. We need to worry about places, but we need to worry about people too”, he added. Wages for the lowest earners in the UK are similar irrespective of location, the IFS found. For those workers in the bottom 10 per cent, by earnings, wages are around £8-9 per hour in every region. In areas where other living costs, such as housing, are more expensive, such as London, that means that workers are more likely to be in poverty. The IFS found that 28 per cent of Londoners were in poverty from 2016-2019 compared to the national average of 22 per cent. Yet while low wages tend to be similarly low across the country, there’s a considerable gap between top earners in different regions – and that is a difference which has persisted for decades, according to the think tank. The top 10 per cent of earners in London were paid 80 per cent more per hour than the comparable group of workers in Scarborough. This effect is shown by comparing tax and population data too, the IFS said: while around one in seven of the UK population live in London, some one in three of the top 1 per cent of income taxpayers live in the city.Beyond wages, in areas such as educational outcomes, there are also stark divides. In Grimsby, in the north of England, fewer than one in five children go on to university, compared to one in three in London. Well trained graduates from other areas are also likely to move to cities where there are already lots of other highly skilled workers: one in two people with degrees in Grimsby move away by the age of 27, the IFS said. The think tank also found that cuts to public spending introduced from 2010 onward exacerbated regional inequalities. This suggests that some of the government’s efforts with levelling up will in part have to be aimed at repairing some of this impact. From 2009-10 to 2019-20, spending on services – not including education fell by an average of 31 per cent for councils in the 10 per cent most deprived areas. That is nearly double the drop of 16 per cent per resident in the 10 per cent least deprived locations, the IFS’ study found. More

Boris Johnson hailed 19 July 2021 as “Freedom Day”, easing the last of the social restrictions imposed on the British public since the onset of the coronavirus pandemic 16 months earlier and drawing a line under some of the darkest days in our recent history.The vaccine rollout had been a triumph, Covid-19 appeared to be on the ropes, Gareth Southgate’s boys had done us proud at Euro 2020 and a summer heatwave had descended. What could go wrong?That question was answered just three days later, when eerie photographs of barren supermarket shelves began to appear on social media, forcing both the stores themselves and government ministers to urge shoppers not to engage in panic-buying in response to the apparent shortage of everyday goods.The phenomenon felt like a return to the bad old days of March 2020 and the very beginning of the pandemic, when frantic consumers raced to gather up as many six-packs of toilet rolls and bottles of hand sanitiser as they could carry to ensure plentiful supplies at home should society indeed collapse in the manner of a Netflix zombie movie.This fresh instalment of hysteria was blamed initially on a “pingdemic”, an explosion of notifications from the NHS Test and Trace app advising employees to self-isolate for 10 days after coming into contact with someone who has tested positive for the virus and therein causing chaos at workplaces across the country.With no exceptions made and official policy still one of “contact isolation” rather than “contact testing”, the UK economy was apparently being hard-hit by staff absences in response to the smartphone-issued quarantine orders, a problem affecting every sector, from retail and hospitality to transport, tourism and manufacturing, causing shifts to be rescheduled and services to run late or be cancelled altogether.But supermarket aisles left empty for the want of stackers or stock would prove to be merely the most immediately visible symptom of a range of issues that had been festering and were beginning to surface.Given the highly intricate and interconnected nature of the global supply chain, in which outsourcing is common and a single product is seldom manufactured, assembled, packaged and shipped by one outfit alone, the chaos being wrought by Covid was not simply confined to Britain but playing out across the map, with sickness absences at factories anywhere potentially leading to bottlenecks and delays everywhere.The NHS app was retooled to be less sensitive on 2 August, meaning fewer employees were unable to work at home, but still the problems persisted, prompting the pundits to look a little deeper for the root cause.An underlying shortage of HGV drivers was also clearly playing a part, a long-term headache already exacerbated by Brexit and worsened by the complications associated with the pandemic.The UK haulage industry estimated that Britain had lost 25,000 European lorry drivers in the wake of the EU membership referendum as they were forced to return to their countries of origin by tighter visa rules and the loss of free movement of labour principles.The three successive national lockdowns imposed in response to the Covid outbreak meanwhile meant that as many as 40,000 applicants to the DVLA in Swansea hoping to take a lorry driver’s test had been unable to do so, their forms piled high and gathering dust.Throw in an ageing workforce and British hauliers were facing a shortfall of as many as 100,000 drivers.Iceland’s managing director Richard Walker told BBC Radio 4’s Today programme in late August that the lack of drivers had to be addressed by the government and was “impacting the food supply chain on a daily basis”.“We’ve had deliveries cancelled for the first time since the pandemic began, about 30-40 deliveries a day,” he said. “Things like bread, fast-moving lines, are being cancelled in about 100 stores a day.”Asked whether he blamed Brexit for the situation, Mr Walker did not hesitate to say yes, branding Britain’s decision to leave the EU “a self-inflicted wound”.His sentiments were echoed by other supermarket bosses, members of the Shadow Cabinet and, eventually, even by transport secretary Grant Shapps and the Office of Budget Responsibility, the latter pointing to a 15 per cent fall in British trade with Europe as a contributor to the shortages.For Trades Union Congress general-secretary Frances O’Grady, the rapid growth of zero hours contracts and the “casualisation” of work through the gig economy was another key factor.“It’s not just about pay and conditions,” she said. “It’s about the business models that we have seen mushroom over the past 10 or 20 years.“Supply chains are in peril. That should be a wake-up call for all of us. The solutions are quite simple. It’s about evening up that collective bargaining power and about treating people with dignity and decency at work.”When the problems began to manifest anew in the shape of the flash fuel crisis of late September and early October, prompting drivers across the country to queue around the block for access to desolate service station forecourts, Mr Johnson’s Cabinet was forced to act.It drafted in Army drivers to ferry petrol deliveries from distribution terminals to the pumps under Operation Escalin (a Brexit emergency backup plan hurriedly retrieved from a drawer), begged retirees to get back in their cabs and offered temporary visas to European hauliers, who were, understandably, not particularly inclined to help out.That episode – propelled to an extent by some unhelpfully alarmist media coverage, centred around the inevitable shots of snaking lines of traffic – did eventually ease, but not before post-Brexit Britain had been likened to “boycotted Cuba” by Europe’s newspapers.From the disastrous disappearance of Haribo to the nightmarish prospect of a world with no Irn-Bru, Walkers Crisps or Weetabix, here is a reminder of some of the key products we ran dry of in 2021, the year we went without.HariboOne of the first victims of the HGV driver crisis was the German confectioner, who first reported supply issues on 2 July before the extent of the problem became frontpage news – a dire turn of events for Tangfastics loyalists.Trade magazine The Grocer reported that Haribo had told its wholesale and retail customers that it was “faced with several challenges throughout our supply chain including a shortage of drivers” but was “working flat out to manage the situation”. 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The government has been told to stop neglecting London’s trains if the UK wants to boost its status as a global trading hub. London’s transport network needs to be “properly funded” if the City is to boost the government’s global trade agenda, said Catherine McGuinness, chair of the City of London Cooperation. The city, as the country’s most important services’ hub, needs infrastructure that is “not in decline, managed or otherwise” she added, speaking at a trade conference organized by the Centre for Policy Studies at London’s Guildhall on Monday.Her remarks follow an interview with London’s transport commissioner, Andy Byfold, with the Observer on Sunday, in which he warned that unless fresh investment is agreed, the capital is “staring into the abyss”. “The negative route, the danger we face, is a managed decline, Mr Byfold said.Ms McGuinness also noted that much of the government’s rhetoric has focused on the quick wins from liberalising trade in goods by cutting tariffs with free trade deals. City leaders, including Ms McGuinness, called on the government to do more to boost trade in services, which is often poorly served by too great a focus on Free Trade Agreements. This approach, they say, does not reflect the UK’s economic strengths as a services-heavy economy. The sector accounts for around 80 per cent of GDP, and employs more than two million workers. Yet the UK’s most economically significant bilateral trade agreement, the EU-UK trade and cooperation agreement, provides relatively weak provisions for services. The impact of Brexit on services’ trade is not yet clear, in part as it is harder to measure than that in goods.Compared to goods’ focused deals, trade in services is often more challenging, Ms McGuinness said, because of regulatory barriers. It therefore demands intense “regulatory dialogue” including side routes like memorandums of understanding and regulatory forums. The remarks have particular significance post-Brexit, as the UK still lacks an effective regulatory forum with one of its biggest markets for financial services exports, the EU. A memorandum of understanding has yet to be formally agreed and signed between the two parties. Proposals made by Brussels also indicate that it plans to crack down on cross-border activity, including banks serving EU clients from London.Meanwhile, the UK should “be worried” about the future of the multilateral trading system, said Peter Mandelson, a former trade commissioner to the EU. “China has been adept at spotting and exploiting gaps” in the WTO rulebook, Mr Mandelson said. But it is not the only country to “play fast and loose” with the WTO’s rules. The system needs repair and improvement, he added.The comments came after the trade secretary, Anne-Marie Trevelyan, told City leaders that the UK must prepare for a shift in “global economic gravity” towards Asia.The trade secretary said: “The seven largest emerging economies are projected to surpass the economic size of the G7 during the 2030s.“Between 2019 and 2050, more than half of global growth is expected tom come from the Indo-Pacific,” she added. The UK has already started the process of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). And talks are also expected to begin “in the months ahead” with the Gulf Cooperation Council which includes Saudi Arabia. Trade talks with India are expected to begin early in 2022. More

The UK’s most vulnerable families and pensioners face an 18-month-long squeeze on incomes as benefits fail to keep pace with a surge in the cost of living, economists have warned. The speed of price growth is set to peak at close to 5 per cent in spring next year and remain high for the next two years according to the Bank of England and government spending watchdog, the Office for Budget Responsibility. It means people on benefits will have to wait for the lagging state pension and universal credit to catch up with surging inflation. As pressure grows on the chancellor to ease the burden, Baroness Altmann, Conservative peer and former pensions minister, said the pressure would be felt disproportionately by the less well-off.“I do worry that the lives of older people who don’t have huge wealth don’t seem to matter,” she told The Independent. “Policies have been introduced that seem to favour those older people who are already well-off and have taken money away from those who can least afford it.”She added that pensioners were especially exposed to inflation, as poorer retired people spend a greater share of their income on “basic essentials” which have shot up in price.This year, the 3.1 per cent increase in benefits planned for next spring is in line with the consumer price index’s (CPI) reading in September, despite the most recent data for October showing that inflation was at 4.2 per cent. This now is also the case for the state pension, after the government said it would break the so-called triple lock, which would have increased it by whichever was highest out of earnings, inflation or 2.5 per cent. Mr Sunak has been urged to use part of the saving made from cutting the £20-per-week universal credit uplift to address the energy-induced crisis in the cost of living. Mike Brewer, chief economist and deputy chief executive of the Resolution Foundation, said: “He could spend some of the money he saved from £20-per-week on energy-specific measures, whether that be the warm homes discount or cold weather payments.“We’re also in a for a year or several months of stagnating real wages too.”Guaranteeing the triple lock was a key Conservative manifesto pledge, but was put on hold in September for a year.Analysis by the Liberal Democrats suggests the move could leave pensioners £2.6bn poorer in real terms next year if the Bank of England’s forecasts for the rate of price growth prove correct, meaning that those on the basic state pension will be £208 a year worse off, while those on the new state pension will be £273 worse off.Households have already faced months of rising costs and near-stagnant benefits. The inflation-linked increase to universal credit and some other benefits was 0.5 per cent, far below the rate experienced by households in the 12 months to October.And a slowdown in wage growth throughout 2022 is expected to only be a growing problem for Rishi Sunak, according to the Resolution Foundation. Even in-work households who draw on benefits will feel a squeeze on their budgets through to next winter, as inflation eats through pay growth.Added to this sorry picture is rising energy bills, said Mr Brewer, with soaring gas prices being one of the biggest drivers in price growth in recent months. They are set to continue to push up households’ costs. The energy price cap, designed to limit the level at which energy providers can increase bills, could rise by as much as 30 per cent in April next year, according to analysts at research company Cornwall Insight.Labour’s shadow work and pensions secretary Jonathan Reynolds told The Independent: “This Conservative-made cost of living crisis is set to hammer those who can least afford it. “The government’s actions should be making life easier, not harder for people this winter, yet instead they have pressed ahead with universal credit cuts, tax hikes and a broken promise on the pensions triple lock. Labour would ease the burden by cutting VAT on energy bills to bring bills down immediately.”Jonathan Cribb, senior research economist at the Institute for Fiscal Studies told The Independent that the crisis will just “get harder if inflation climbs further”.Unexpected inflation spikes are particularly bad for those on fixed incomes, he added. The chancellor said in response to Wednesday’s inflation rise that many countries were experiencing higher inflation, and that the government was helping people to improve job prospects by allowing universal credit recipients to earn more money before losing some of their benefits. “We are also providing more immediate support, including through the £500m household support fund for the most vulnerable families, fuel and alcohol duty freezes, and the energy price cap,” Mr Sunak said. More

Children and young people face becoming a lost generation due to rising education inequality, high taxes and climbing house prices, leading economists have warned.Analysis shows that, despite spending touted in Rishi Sunak’s Budget on education and childcare, those in further education over the next three years will face funding that is still 10 per cent lower than it was in 2010.Tax hikes introduced by the chancellor will also disproportionately hit younger people as they target work over wealth. Cohorts entering the jobs market will also face stagnant pay packets, with wages which are 40 per cent lower than predicted before the financial crash of 2008. They face the highest tax burden as a percentage of GDP since 1950 by 2026, equivalent to £3,000 per household even as inflation may reach 5 per cent next year.Kate Green, the shadow education secretary, told The Independent: “The chancellor has got the wrong priorities and young people are paying the price for it.“This is a Budget that will leave millions of families on lower incomes worse off, fails to match the scale of the education recovery challenge with the funding the government’s own catch-up commissioner Sir Kevan Collins said was needed, and still leaves sixth forms and colleges with less funding than they had more than a decade ago,” she added.Weak pay growth comes as younger people also face higher property prices. According to the Office for National Statistics the average UK house price was £25,000 higher in August than a year earlier, at a time of low interest rates and after the government cut stamp duty – a move widely criticised for further inflating the market.Economists said Mr Sunak had chosen to back measures that would have less of an impact on elder generations rather than those that would hit all ages equally.“In the autumn 2021 Budget, it’s notable that extra public spending is concentrated on health and social care for older people,” said Lord Willetts, president of the Resolution Foundation’s Intergenerational Centre.“We do have an obligation to older generations, but we need to do more for younger people as well,” he added.Funding for sixth form colleges will still be 10 per cent lower in real terms than in 2009-10 by 2024, when accounting for inflation, even as evidence suggests starkly deepening educational gaps between children and young people from wealthier and poorer backgrounds.Overall, the total allocation for schools’ Covid recovery in the budget amounted to £4.9bn. This was less than a third of the total requested by former government education tsar Sir Kevan, who resigned his post in June over dissatisfaction with the catch-up funding offered by the Treasury.In response to the Budget, the education expert wrote in The Times, that it was a “surrender” in the effort to recover lost learning. “The short-term saving offered by a limited recovery programme will be dwarfed by the long-term cost of successive cohorts leaving education with lower skills, an effect that will be most apparent in our poorest communities,” Sir Kevan added. The Budget “represents a false economy and a step towards a less equal society”.Older students were particularly poorly catered for in the budget, according to the IFS.“Spending per student in further education and sixth form colleges will remain well below 2010 levels. This is not a set of priorities which looks consistent with a long-term growth strategy,” director Paul Johnson said.Younger people were also hit harder than elders with higher taxation, despite the new health and social care levy, which aims to raise £12bn per year to address the pressures of an ageing population.“Both NICS [the health and social care levy] and changes to the personal allowance and higher rate threshold will affect younger people who are working rather than pensioners who are out of work,” said Xiaowei Xu, a senior research economist at the IFS. “The chancellor could have chosen to raise something like council tax that would have linked to homeowners and therefore linked to pensioners as well,” she added.While there was a clear need to increase funding for the NHS and social care, the chancellor needed to reconsider how much support he was offering younger people, economists said.The announcement of the increases to national insurance contributions, which will become a health and social care levy, came several weeks ahead of the Budget. The major tax increase was criticised at the time as being a tax on the working age population, rather than those most likely to be using social care services for age-related needs.The Budget was also criticised for falling short on childcare provisions. It also offered an increase in benefits only to those universal credit recipients who can work, as opposed to those who may need to care for their children full time. Children in those households will be, in relative terms, worse off even after changes to the national living wage and the universal credit taper.Shadow chancellor Rachel Reeves described the Budget as “hammering working people, while giving banks a tax cut”.“The Tories have no plan to tackle the cost-of-living crisis, no plan to shift the unfair taxes they’ve hit working people with and no plan for growth,” she said.Low interest rates have also fuelled higher asset prices in recent years, making it harder for younger workers to get on the housing ladder. “We have a continued period of significantly negative real interest rates, probably therefore continued high levels of asset prices and very poor levels of earnings growth, all of which tends to favour those who are older and wealthier relative to those who are younger and less wealthy,” Mr Johnson said.A Treasury spokesperson, said: “This Budget means billions of pounds to deliver the priorities of the British people by investing in stronger public services, including our education system, levelling up opportunity, driving business growth and helping working families with the cost of living.“It makes work pay by cutting the universal credit taper rate from 63p to 55p, and raising the national living wage by 6.6 per cent to £9.50 an hour in April 2022, which the Low Pay Commission estimate will benefit 2 million workers. And we ensured our action to fund health and social care announced in September applied fairly across generations by extending the health and social care levy to apply to those working over state pension age.” More