Brexit: Ian McConnell: Verdict emphatic but will Boris Johnson listen to business?

Many of the electorate, in all walks of life, will obviously because of their love of Brexit refuse to admit there is a problem. And it appears this observation might well apply to some senior Conservative politicians.

That is why it is so important to canvass the views of those on the front line. Only 18% of business leaders responding to The Herald’s question at the Institute of Directors in Scotland’s virtual global conference last week think the departure from the European Union is not damaging the UK economy, with the remainder giving a “don’t know” response.

Business leaders’ experience of, and opinions about, the post-Brexit situation should most certainly carry weight and be listened to by the UK Government.

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The Johnson administration, of course, surely has a duty to minimise damage to the economy and living standards from Brexit. So you would think it would be glad to hear the views of business and be at pains to act to at least mitigate the problems.

It would of course be even better if the Conservative Government moved swiftly to provide a proper solution by taking steps to rejoin the European single market but to say the chances of this look remote would be a gentle euphemism, such is the ideological fervour within the Johnson Cabinet.

In any case, there is no sign that the Johnson administration wants to listen at all. There have been plenty of sensible suggestions put forward to mitigate the damage. None have been taken up.

An obvious move would be to reverse the clampdown on immigration from EU countries to address labour and skills shortages which are hampering greatly the UK economy’s recovery from the grim effects of the coronavirus pandemic. The only drawback of such a crucial and eminently sensible move would be a specific political one for the Conservative Government – given that for many of the Brexit supporters who enabled Boris Johnson to sweep to victory in December 2019 leaving the EU was all about bearing down on immigration. This is a demoralising reality. However, it is a problem only for the Conservative Government and not for the country, which will only be damaged further by a continuing refusal to reverse the foolish post-Brexit immigration stance.

Another step which could be taken swiftly is to accept regulatory alignment and thus dismantle some of the barriers to trade thrown up by the UK Government. The refusal on regulatory alignment from the Johnson administration was always going to maximise friction on trade – and so it has done. And reversal of this recalcitrance would likely help the Johnson administration sort out some of the mess from a Northern Ireland protocol of its own creation.

Brexiters seem increasingly quiet about denying the current shambles even if some do still try to divert blame for what has been caused by the European single market exit on to the pandemic. And we must remember this monumental mess is even before we get to the stage of the UK beginning in earnest its border checks on goods coming in from the EU. For key food imports from the EU, implementation of customs checks was earlier this year delayed from April to October, with the updated plan from the unprepared Johnson administration being to phase them in from that point.

It says much of the UK Government’s lack of readiness for its own desired hard Brexit that it felt the need to push back for months the implementation of customs checks on goods imports from the EU. After all, it has in recent years appeared keen to rile up our European neighbours wherever it has seen an opportunity to do so, seemingly with a degree of playing to the Brexiter gallery.

Given the degree of shambles so far, we can only be hugely relieved the customs checks were delayed. However, goodness knows the degree to which things will get even worse when they are eventually introduced.

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People are sometimes tempted to look at a mess and think it could not get any worse. This is a naïve view in many situations, and certainly in the context of the UK’s post-Brexit predicament.

Louise Macdonald, national director of IoD Scotland, summed up some of the woes well as she highlighted business leaders’ view that Brexit is having a “significant” economic impact, in the wake of the responses at the business organisation’s conference to The Herald’s question.

Ms Macdonald cited the effect on supply chains of skills shortages, and highlighted rising costs and empty shelves. And she called for government action to avoid further damage to business.

The Johnson administration led the UK out of the European single market on December 31 last year. The UK officially left the EU on January 31 last year, but a transition period during which the country remained in the single market ran until the end of 2020.

Ms Macdonald said last Friday: “While the pandemic may have distracted many from the impact of Brexit, feedback from business directors attending our global conference is clear – Brexit is having a significant impact on the economy. In the last week alone, we have seen skills shortages impact the supply chains of many multinational companies and we are all too aware of rising costs and empty shelves in the supermarket. It is vital that the government takes heed of this feedback, and acts now to ensure that the business community is not further scarred.”

There is indeed a need for urgent action. However, we should not on past experience get our hopes up that the UK Government will act to mitigate the troubles caused by its hard Brexit.

The Johnson administration has been firmly in refusal mode when it has come to sensible moves on immigration which would go at least some way to alleviate labour and skills crises in the likes of the logistics, hospitality and food-production sectors, to name just three. These crises have, of course, arisen in large part because of the Conservative Government’s Brexit and the ending of free movement between the UK and EU.

On the trade front too, the consequences of leaving the European single market are all too evident in terms of the damage to UK exports. The cold numbers, of course, bear this out, whether the Brexiters are persuaded of the reality of the situation by these or not.

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Industry figures published last week showed UK food and drink exports in the first half of this year were down £2 billion on pre-Covid levels in large part as a result of the trade barriers erected by the Conservative Government’s hard Brexit. UK food and drink exports to the EU were in the first half of 2021 down by more than one-quarter on the same period of 2019, before the coronavirus pandemic struck.

The Food and Drink Federation, publishing the figures, noted sales to non-EU countries were in the first half of 2021 up by 13% on the same period of last year. It added that they amounted to £4.3bn in the first half of 2021, accounting for 46.6% of the UK’s global food and drink exports total “driven by a return to growth in China, Singapore, Australia, Japan and the Gulf region”.

The industry body declared: “This increase means non-EU exports are now almost back to pre-Covid levels.”

However, highlighting the much-weaker picture for exports to the EU, it added: “Despite the return to growth in these countries, overall sales of UK food and drink are down £2bn compared to pre-Covid levels, because of a sharp drop in sales to the EU. A combination of the ongoing impacts of the Covid-19 pandemic, and new barriers to trade resulting from the new trading arrangements, have led to a fall in exports to the EU of more than a quarter since H1 2019. Exports to nearly all EU member states fell significantly, including a loss of more than £0.5bn in sales to Ireland, while sales to Germany, Spain and Italy are each down around a half since H1 2019.”

UK construction sector growth slowed sharply in August, amid “formidable” supply-chain pressures fuelled by Brexit and the coronavirus pandemic, as material and staff costs went “through the roof”, a key survey has shown this week.

Expansion slowed last month across housebuilding, commercial property construction and civil engineering, the three sub-sectors covered by the survey from the Chartered Institute of Procurement & Supply and IHS Markit.

It is no wonder that business leaders, many of whom will be facing grim challenges on so many fronts caused by the European single market exit while having to navigate the extremely difficult fall-out from the pandemic, gave an emphatic “yes” when asked if Brexit was damaging the UK economy.

The big question now is what, if anything, the Johnson administration is going to do about it.