Trump and Ongoing Brexit Trouble Combine to Thwart UK Trade
(Bloomberg) -- The UK’s trade in goods is set to grow by an average of just 0.7% a year in the decade from 2023, well behind the global average of 2.9%, according to a report published Monday by Boston Consulting Group.
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Post-Brexit frictions will continue to hinder trade with the European Union, while higher US tariffs under President-elect Donald Trump will weigh on UK exports, BCG said. It added that Britain will be buffeted by US and EU efforts to divert their supply chains away from China. Last year, it had expected trade to grow by 0.9% in the 10 years from 2022.
The report comes after a torrid week for Chancellor of the Exchequer Rachel Reeves, as worries about her spending plans drove borrowing costs higher and caused the pound to slide. Reeves is relying on growth in the economy picking up, which would help the Treasury meet her fiscal rules, but concerns over the strength of Britain’s trading position will throw further doubt on those hopes.
Prime Minister Keir Starmer has vowed to pursue a “reset” with the EU this year to remove trading frictions, and is also continuing talks on free trade agreements with the likes of India and the Gulf Cooperation Council. On Monday the government will announce a former Treasury official and current HSBC executive to lead talks with Brussels, the Financial Times reported.
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BCG expects the US — Britain’s largest single-country trading partner — to keep outsourcing business processes to nearby countries, a policy known as “near-shoring.” This puts the UK under extra pressure to strengthen relationships with other countries.
Tim Figures, partner and associate director at BCG, said the projections in the report were “concerning for a global trading nation such as the UK, as they show trade making a declining contribution to the national economy.”
“While resetting trading relationships with the EU – which remains the UK’s main trading partner – will be critical to addressing this, our projections suggest that the issue is a broader one, impacting exports globally,” Figures said.
BCG’s analysis suggests that while global trade growth over the next 10 years will stay at 2.9%, trading patterns will shift as geopolitical tensions mean western countries loosen their ties with China and instead look to deepen relationships with close allies. One bright spot for the UK could be India, where rapid economic growth could boost bilateral trade by 1.8% a year even without an FTA.
(Updates with Michael Ellam appointment in fourth paragraph.)
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