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Lies, damned lies and FT propaganda.

FT
Written by Catherine McBride

I would have expected the Financial Times (FT) to have given up on its Anti Brexit Propaganda by now, but they just can’t get over Brexit. This time they are telling some half-truths and using some extremely misleading graphs to disparage UK trade.

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Before I go through their claims, the chart below shows the reality of UK trade as reported by the ONS. The ONS chained volume measure (CVM records starts in 1997, so when the FT article exclaims this is the steepest trade fall on record, I assume they are talking about the last 27 years.

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The FT headline declares: UK trade volumes suffer record five-year decline. Looking at the graph above I find that hard to believe. Although in the text of the article, they do a quick bait and switch from the article’s headline and change trade into goods trade, ignoring the UK’s booming service trade.

The FT has decided to use a chart of 5-year rolling percentage changes to declare the five-year percentage change between 2018 to 2023 as the worst since records began, and therefore proof that Brexit has been bad for trade. They are using total goods trade, exports plus imports, to all destinations EU and non-EU, excluding precious metals, measured in chained volume measures (CVM). And, of course their most recent five-year period covers the Covid pandemic and the Ukraine war.

Such analysis doesn’t tell us much about actual trade.  For example, their graph shows 2011 as -1% even though it was one of the 2 highest years for trade between 1997 and 2011, it was just unfortunate that the other high trade year was in 2006, five years earlier, so the 5-year rolling percentage change for 2011 was slightly negative. Incidentally, 2006 has the highest 5-year rolling percentage change ‘since records began’ of 31.2% simply because 2001 was one of the worst years for UK trade. Total trade in 2006 was £117 billion lower than in 2018, the highest year for total trade since 1997, but 2018’s 5-year rolling percentage change is only 15.5%, half that of 2006.

If the FT had used a 4-year rolling percentage change in total goods trade rather than 5 years, then the greatest percentage fall would have been in 2021, not 2023. If they had used a 3-year rolling percentage change, then the greatest fall would have been in 2020, rather than 2023. No doubt someone at the FT was tasked with calculating every possible annual change until they found the one that made 2023 look the worst. Although the idea of a rolling percentage change, regardless of the number of years used, tells us nothing about actual trade.

Next, the FT goes on to discuss ‘UK imports’ by which they mean ‘goods imports’ but they are combining good imports from both EU and non-EU countries and comparing 2023 goods imports to 2022, as well as to 2018. But the FT failed to mention that the BIG fall in UK imports was with non-EU countries. UK goods imports from the EU were only down 1% between 2022 and 2023 while non-EU goods imports were down by 14%. If Brexit is the cause of the UK’s lower imports, why is it mostly affecting goods imports from non-EU countries?

If you read the FT article you might have noticed the sudden switch to comparing 2023 trade with 2022, rather than with 2018. I can only assume that it is because goods imports from the EU in 2023 were unchanged from 2018, using CVM to account for inflation, but down 1% from 2022, so the FT decided to use 2022 instead.

The FT’s columnist didn’t try to explain the massive fall in non-EU goods imports, but if we look at other ONS trade publications we can see that the biggest drop was in goods imports from China, particularly capital goods: Office Machinery imports were down by £4 billion (-60%), Telecoms and sound equipment were down by £5 billion (-62%), Clothing and Footwear were down by over £2 billion(-35%), Medical and Pharmaceutical products were down by £900 million (-76%), and Other (consumer) manufactures were down by £1.4 billion (-23%). In all, imports from China were £15 billion lower in 2023 than in 2022 (-22%). This has nothing to do with Brexit. But it could possibly be something to do with the UK population working from home so there is less need for office machinery and the UK recession probably means people are buying fewer items of clothing and manufactured consumer goods. I am guessing here but these are certainly more likely causes than Brexit – China isn’t even in the EU.

Next, the FT article goes on to discuss the fall in exports, again meaning ‘goods exports’ and this time they do mention that both EU and non-EU exports fell by similar amounts. But again, if we go into ONS export statistics by commodity and country, which are calculated in current prices, the big export falls are with China, the Netherlands and Switzerland, total exports to the US were higher. So how can lower exports be simply blamed on Brexit?

Using ONS CVM data for SITC groups, the biggest export falls between 2018 and 2023 were in Fuels, Material manufactures, Chemicals, and Miscellaneous manufactures. While Unspecified goods, Precious metals and Crude materials fell between 2023 and 2022 but were all higher when compared to 2018. The FT tries to blame this on Brexit as well, quoting a Resolution Foundation economist who believes lower exports were a ‘big sign’ of the impact of Brexit, but the Resolution’s Economist didn’t or couldn’t explain why we saw similar falls in goods exports to non-EU countries.

Export volumes are determined by the economic health of your trading partners and your own ability to supply the required goods. Our Chemical exports have been falling since 2015 and our Fuel exports since 2017, both after accounting for inflation. Blaming these falls on Brexit is ridiculous, nothing changed in UK-EU trade until the end of the Transition Period on 31st Dec 2020. It is more likely that the fall in fuel exports and chemical exports to both EU and non-EU destinations is related to the UK’s Net Zero regulations, high corporate taxes and additional windfall taxes that have lowered oil and gas production and encouraged chemical and plastic manufacturing to move out of the UK.

Strangely the Resolution Foundation economist believes that the fall in goods exports is due to ‘new trade barriers that were put in place by Brexit’.  She doesn’t try to explain how these ‘new trade barriers’ also lowered exports to non-EU countries. I am also surprised she is unaware that the UK and the EU have tariff-free and quota-free trade agreement and that some of our largest trading firms have now admitted that Brexit hasn’t harmed their trade. Nissan, for example, declared in November last year that the impact of Brexit on its UK operations was negligible.

The FT claims that UK goods trade is worse than other advanced economies, but it doesn’t say which ones, nor do they mention the UK’s booming service trade, the real story of UK post-Brexit trade, which has outperformed other advanced economies.

As usual, the FT throws in something about trade intensity, a statistic they don’t appear to understand. Trade intensity is the proportion of Trade (imports plus exports) to GDP. A country’s trade intensity can increase if its trade increases but also if its GDP falls. And of course, a country’s trade intensity can be low because its GDP is very large. The US, China and Japan all have low trade intensities. But still, the FT appears to be worried that the UK’s trade intensity fell very slightly between 2019 and 2023. (Notice the switch back to comparisons with 2019 rather than 2018.)

However, using the ONS data for UK GDP in Chained Volume Measures (CVM) we find that UK trade intensity is very flat. During the past 10 years, UK Trade intensity has ranged from 60% to 65%. In 2023 it was 63.6%, in 2022 it was 64.7%, in 2021 it was 60.4%, in 2020 it was 62.2% (despite Covid, as GDP fell as well as trade), in 2019 it was 64.7%, in 2018 it was 64.2%, in 2017 it was 63.2%, in 2016 it was 61.8% and in 2015 it was 60.9%. I could go on, but I suspect you get the picture. There is nothing to write home about here. UK trade intensity varies slightly every year, and it was higher in 2023 than it was in six out of the last 10 years, (or 7 out of the last 11). So how could slightly lower trade intensity in 2023 be caused by Brexit if slightly higher trade intensity in 2022 was not caused by Brexit? As avid FT readers will know, the FT was also complaining about lower UK trading intensity due to Brexit last year, but from the table below you can see that 2022 was a high point for UK trade intensity.

The two trade intensity high points, 2019 and 2022, were years with increased trade. In 2019 this was due to import and export stockpiling in case we left the EU without a trade deal. While in 2022 trade rebounded after Covid lockdowns and travel bans were lifted. By the way, total trade was £25 billion higher in 2022 than it was in 2019 but our GDP was £37 billion higher so the ratio between Trade and GDP was the same (at least it was to one decimal place) in both years.

But the craziest piece of propaganda in the FT article is a graph of the percentage change between 2023 and 2018 in UK exports of most commodity product sectors. The word most in the graph’s title is interesting, they only left out one SITC product group other than precious metals.

The FT has used the UN’s Standard Industry Trade Classifications (SITC) product groups, presumably because the ONS calculates CVM values for them. This graph implies equal weighting to each product group even though several of the UN’s SITC groups are products that the UK doesn’t export in any quantity. So don’t panic if you notice that exports of SITC 4 Animal & vegetable oils and fats were down 20% between 2018 and 2023 because the UK only exported products worth £500 million in this category. It is our smallest export category by some margin.

For context, the UK exported £142.5 billion SITC 7 Machinery & transport equipment in 2023. This is our most important goods export sector and includes both cars and aircraft parts. It also only fell by 2.8% between 2018 and 2023 but was up 9.8% between 2022 and 2023. We can only guess why the FT went back to comparing 2023 with 2018 again.

And while we can’t completely dismiss the 27% fall in exports between 2018 and 2023 of SITC 8 Miscellaneous manufactures as this group is worth £36 billion. Nor the 35% drop in exports of SITC 3 Fuels as this group is worth £26 billion. However, they are not quite as important as this graph makes them appear by giving them equal weight with machinery. Even at their highest export value in 2002, UK fuel exports were less than half UK machinery exports.

It is also strange that the FT chose to ignore exports of SITC 9 Unspecified goods, the only SITC group that the FT omitted from their graph. Could this have been because at £16.6 billion in exports, SITC 9 was 448% higher in 2023 than in 2018 and it would have made all of their other percentage changes look insignificant? Although SITC 9 isn’t a large export group for the UK, its exports were twice as large as SITC 2 Crude Materials and 37 times larger than SITC 4 animal and vegetable oils and fats – and both of these groups were included in the FT’s graph.

It is also telling that the FT left out any discussion of UK service exports and just concentrated on goods. Had they included services, total UK exports would have been 2% higher in 2023 than in 2018, after accounting for inflation.

Had the FT compared 2023 with the preceding year (2022) as is usual, changes in exports of several SITC groups would be positive including our largest exports sector, Other Business Services up 8.8% with exports of £148 billion, and our second largest export sector SITC 7 Machinery and Transport up 9.8%. Other sectors such as Fuels, Chemicals, miscellaneous manufactures and material manufactures would have still been lower but at least the graph would have given a fairer picture of the state of UK exports by industry sector.

In case you are interested here is a table from the ONS database of UK exports to all destinations, by industry sector for the last ten years, sorted by export value. So you can easily see which industries are important to UK trade and which ones aren’t. I have also calculated the change between 2022 and 2023.

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The Financial Times has gone to great lengths to try to convince its readers that Brexit has been bad for UK trade, conflating EU and non-EU goods trade, ignoring service trade and never entertaining the possibility that any other government policies, such as Net Zero, may have been the real cause of certain industry groups seeing large falls in their exports. No, in the FT’s mind, all bad things must be due to Brexit.

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About the author

Catherine McBride