UK: Five important structural changes since Brexit – Natixis

The United Kingdom has been hit by the dual shock of Brexit and COVID-19. What significant changes have resulted from this dual shock? Economists at Natixis point to some significant changes visible today relative to the period prior to 2016.

Foreign trade

“The fall in the United Kingdom’s trade with the EU since 2019 has not been offset by an increase in trade with the rest of the world: the United Kingdom’s export market share has fallen since 2019.”

Direct investment and corporate investment

“Has the UK become more attractive, thanks to the prospect of a less regulated economy; or less attractive, due to its withdrawal from the European single market? We note a decline in direct investment and in corporate investment in the UK relative to the eurozone since 2017.”

Labour market situation

“We see a fall in the number of Europeans working in the UK, a fall in the employment rate in the UK relative to the eurozone and an acceleration in wages and a skewing of income distribution in favour of wage earners thanks to the fall in the labour supply.”

Modernisation and innovation effort; automation

“The UK has seen a growing corporate modernisation and R&D shortfall without a very visible effect on investment for the time being.”

Employment in “sophisticated” sectors 

“How has employment in new technologies, financial services and industry evolved in the United Kingdom since 2016? The market shows job losses relative to the trend for employment in new technologies and manufacturing employment, but not for employment in financial services.”

See – EUR/GBP: Brexit and new covid variant to weigh on the pound – Rabobank