2020 Was the Year the Brexit Chaos Became Real

For most of the last four years, Brexit has felt like little more than a Westminster parlour game.

In June 2016 former Prime Minister Theresa May famously said “Brexit Means Brexit,” an attempt to provide clarity that merely emphasised how intangible the concept of “Brexit” felt at the time. But 2020 has been different.

When Britain officially exited the European Union on January 31st, something tangible finally happened. Now there was no going back. But since then, we have been in a “transition period”, continuing to follow Europe’s rules, and Britain has been trapped in limbo.

This means that at the end of the year – at 11PM on the 31st December (or midnight Brussels time), the real changes start to happen. Britain will unmoor itself from Europe’s rules.

However, the new year will not mark the start of this process – it has been going on for some time. Regardless of trade deals and future agreements, Brexit is already making a real world impact. For many businesses, 2021 will be a continuation of processes that began this year.

As 2020 wore on, it saw businesses prepare for the worst, and as the year drew to a close, activate contingency plans and brace for the biggest shake-up in the structure of Britain’s economy in 40 years.

In other words, whatever happens in 2021, it was 2020 when the shit really hit the fan. 

For most of the year, Brexit didn’t receive as much attention because of the pandemic, but not everyone could afford to tune out.

Brains continued to drain and cash continued to flow outwards in the services sector – which makes up the vast majority of the UK economy.

One striking example of this comes from the consultancy EY, which tracks 222 British financial services firms. It notes that a further 400 jobs were relocated from the UK to Europe in just the third quarter of 2020 – taking the total to 7,500 relocations since the referendum. So the fear isn’t that after Brexit Dublin, Luxembourg, Frankfurt and Paris might steal away British jobs – they have already started taking them. 

While these numbers are not huge, the importance of financial services to the British economy is pretty clear: According to the same report, 2020 also saw the value of financial assets being transferred from London to Europe since the referendum ticking over the £1 trillion (yes, trillion) milestone. Whatever happens now, those jobs and that money are not coming back. And that is just the tip of the iceberg.

Towards the end of 2020 is when shit truly started to get real, as businesses and industry ramped up contingency plans. This meant that business decisions and activities were directly being shaped by the imminent end of the transition period.

One of the clearest signals that this was happening came from manufacturing. IHS MarkIt reported that manufacturing output shot up significantly in November as companies aimed to stockpile before the Brexit uncertainty hit their supply chains. The fact that England was in lockdown at the same time only emphasises how unusual this spike of activity was.

Supermarkets began stocking up too, to ensure a continuity of food supplies whether we end up with a deal or not. The Chairman of Tesco admitted that the company is stockpiling “long life” goods, and the Chief Executive of Ocado has said similar. The sunlit uplands might entail a surprising amount of tinned food. 

Stockpiling did not just mean that warehouses were filling up though. Because these sectors are used to operating on “Just In Time” principles where supply chains deliver parts and goods only when they are needed, it means the surge in demand had a cascading effect on other parts of the economy.

For example, it also put pressure on Britain’s logistics infrastructure. Ports were and are currently struggling to cope with huge increases in demand as importers raced to get goods into the country before the potential imposition of new tariffs and customs regimes. And the flood of activity led to further disruption and delays. The issue was compounded further when France closed its borders to accompanied freight due to the new COVID variant.

As the BBC reported, some of this was to be expected because of normal Christmas demand, and some of the disruption was unsurprisingly due to COVID, but Brexit preparation was also a significant factor.

In fact, ship operator Stena Line specifically said that it was seeing huge levels of stockpiling by freight customers on both the North Sea and Irish Sea. It reported an increase of 19 percent year on year, with some of its customers moving six times as much stock as normal.

And the pre-Brexit rush also had big consequences for other parts of the economy too. Earlier this month, Honda’s factory in Swindon was forced to shut down production for several days because the parts it uses are not being delivered in time.

Oh, and of course the increased demand has also impacted the price of importing goods: The British Retail Consortium said that shipping costs were up 25 percent, and that retailers were facing what is essentially surge pricing imposed by shipping lines.

2020 was, then, when Britain and Europe started to brace.

At the time of writing, we still do not know the final form that Brexit will take. The politicians are still fighting over what the exact nature of Britain’s future relationship with Europe will be on the 1st of January. But as we can see, preparations are being made for whatever happens next. For much of British industry, 2020 was the moment when Brexit became a tangible business reality.

So when the history of Brexit comes to be written, 2020 won’t just be the year that our focus was derailed by the pandemic – it will also be remembered as the year when Brexit really did start to mean Brexit.

@psythor