The UK and the EU are still adjusting to their new relationship two months after the Brexit trade deal came into place. Last month, the UK agreed to give the EU more time to approve the Brexit trade deal struck between the two sides. The move comes as Northern Ireland struggles with imports and increased bureaucracy hits exports from the UK. Germany’s official statistics body said the end of the Brexit transition period was responsible for a 30 percent year-on-year plunge in exports to the UK in January but economists predicted the trade slump will ease.
Bert Colijn, eurozone economist at ING, said this week: “We expected very weak eurozone exports to the UK for January, in part due to teething problems at the border, but also due to the fact that hoarding had already fulfilled a lot of British demand for European goods.
“We see a very strong surge in eurozone exports ahead of Jan 1, which confirms that picture.”
He added however that “expectations are that longer term trade is weaker than it would have been without Brexit”.
The chaos in Europe could lead to big losses as Euler Hermes predicted in 2017.
The insurance company offered its forecasts for how Brexit could impact some of Europe’s biggest economies.
It predicted correctly that a deal was the most likely outcome.
In the event of a limited trade deal, Euler Hermes said three countries would be most affected by export losses to the UK, reduced investment, overall GDP and business insolvencies.
These countries were the Netherlands, Ireland and Belgium.
Germany, France and Spain will be moderately impacted, the forecast said
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Overall, it said that between 2017-2021, the eurozone could lose £21billion in goods exports, and £4.7billion in services exports.
The impacts of the Brexit deal on the eurozone will become evident in time to come, but economists are warning that the UK has already taken a hit.
Border disruption with the EU, caused in part by Brexit, is expected to cause an economic hit in the first three months of this year, according to the Office of Budget Responsibility (OBR).
In its latest economic forecast, the watchdog said it expected “near-term disruption” to trade in goods with the EU to reduce gross domestic product (GDP), a measure of the size of the economy, by 0.5 percent in the first quarter of 2021.
COVID travel restrictions imposed on the UK by Brussels have also taken a toll, it said.
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The OBR added: “Taking all these factors into account, we now expect the temporary near-term disruption to EU-UK goods trade to reduce GDP by 0.5% in the first quarter of this year.
“This reflects both that exports appear to have been hit harder than imports and that the trade disruption will affect UK supply chains.
“As firms on both sides of the Channel grow accustomed to new trading arrangements, this disruption dissipates, though further disruption is possible when the UK enforces the agreement in full on its side of the border later in the year.”