Last month Mark Carney, governor of the Bank of England, told an audience in Liverpool, the once thriving port city of North-West England, that Britain has suffered its “first lost decade since the 1860s” when “Karl Marx was scribbling in the British Library.” The governor said that "Over the past decade real earnings have grown at the slowest rate since the mid-19th century." Two weeks before Paul Johnson, the chief of the Institute for Fiscal Studies, said average real earnings in 2021 will be below the 2008 level — "One cannot stress enough how dreadful that is, without real earnings growth. We have certainly not seen a period remotely like it in the last 70 years."


Theresa May, British prime minister, told MPs in the House of Commons on Wednesday: "What I set out yesterday was a plan for a global Britain, bringing prosperity to this country and jobs to people and spreading economic growth across this country."

On Tuesday in a column in The Daily Telegraph, Boris Johnson, foreign secretary and leading Brexiter, claimed countries around the world are eager to strike trade deals with Britain: "They are already queuing up."

The Brexiters are happy with May but the delusion will eventually give way to dis-may!

The future for the UK is not all doom and gloom — of the G-7 western industrialised countries, the US accounted for 56% of the net jobs added in 2010-2016; Germany 15%; UK 12%; Japan 7%; Canada 5%; France 4% and Italy 1%.

However, expecting the branding of "global Britain" to work magic across the world, is delusional.

Apart from poor earnings growth, low productivity, and trade, compared with for example Germany, the UK data are dismal.

1) Of the top 10 trading partners, only goods and services surpluses are achieved in respect of the United States and Ireland (consistently for Ireland since 1999);
2) The UK has had a persistent goods and services trade deficit every year since 1986 with the exception of 1995-1997 (inclusive);
3) The current account [the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers] deficit has been persistent since 1983;
4) The UK has had a budget deficit every year since 1975 with the exceptions of 1988-1990 and 1998-2001.

According to the Office for National Statistics (ONS) data, about 52% of foreign direct investment in the UK comes from other EU countries and 26% from US while 45% of outward investment is in the EU.

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The level of UK trade in goods as a proportion of total trade in goods and services has been gradually falling since 1986 after peaking at 75% in 1985. The ONS says this is consistent with the rising share of UK trade in services (44% of total trade in 2015) — indicative of the UK’s relative strength in services activities.

Total professional and management services now account for 9.5% of UK export services, up by 4.2 percentage points compared to 1999. However, the UK’s strength in services remains driven by financial services which accounted for 22.5% of UK services exports in 2015 — which grew by 3.1%.

The UK's goods trade gap with the rest of the world widened to a record high of £125bn in 2015 but there was a services sector of surplus of £90bn resulting in a total deficit of £35bn.

The deterioration in the current account/ balance of payments balance in recent years, resulted in a record deficit of 5.4% as a percentage of nominal GDP in 2015. It was largely due to UK earnings on assets overseas falling relative to the earnings of foreign investors in the UK.

In 2015, the UK recorded the largest current account deficit as a percentage of GDP among the G-7 economies.

Three of the 7 economies (including the UK) have experienced deteriorating current account balances relative to 2007; however the UK recorded the largest current account deficit among these economies in 2015 at 5.4% of GDP. This also represented a worsening position relative to 2014. In contrast, Germany experienced the largest current account surplus in 2015 (8.5% of GDP). Of the 7 countries, Germany, Italy, France and the US are the economies that saw an improvement on their current account balance as a share of GDP in 2015 relative to 2007.

In 2015, 44% of the UK’s goods and services were exported to the EU, while 53% of UK imports came from the EU. Between 2012 to 2014 an average of slightly more than 50% of the UK’s exports of goods went to the EU and just under 50% to non-EU territories, primarily the US and China.

In 2014, the US was the UK’s largest trading partner in services accounting for 23% of total UK exports of services and 18% of UK service imports. However, as with trade in goods, more than half of the UK’s top 10 trading partners in services are EU countries, with Germany, Netherlands, Spain and France dominating.

Within the EU, the UK exports the majority of its goods and services to a handful of countries — Germany, France, Ireland and the Netherlands. The UK is also an important part of the EU supply chain, as a relatively high proportion of British exports of goods are components manufactured in the UK for onward assembly elsewhere in the EU. For example, Airbus aircraft wings are manufactured in the UK for export and onward assembly in other parts of Europe.

The UK tends to export more components, fuels, food and beverages, and basic materials to the EU than non-EU countries, but export more finished goods and services to non-EU countries than to the EU.

The UK mainly exports to China cars made by foreign firms in the UK and gold bars that are first imported.

The most substantial bilateral deficit within the EU is with Germany, which increased by 46.6% in 2015 (£25bn) relative to 2007. The UK trade balance with respect to Germany has been in deficit in the past decade with the largest record seen in 2015.

The ONS says the US is the UK’s largest export partner and second-largest import partner — second only to Germany — in terms of trade in goods and services. In 2015, the US accounted for 19.7% and 11.1% of UK’s total exports and total imports, respectively.

Services and goods account for a similar proportion of total UK exports, with services accounting for only a slightly greater proportion (52.9%) of exports to the US in 2015.

Brexit, UK top trading, exporting countries

Source: Office for National Statistics

No plain sailing

The EU-27 ex-the UK, as a group, remains the UK's main trading and investment partner, and reflecting large foreign ownership in the UK, merchandise exports are mainly supplies to global chains.

Services exports generally do not have the same level of economic impact/ linkages as manufacturing — for example 164,000 people are employed in finance in the City of London while across the country total jobs in financial services are just above 3% of the workforce.

Foreign companies accounted for 51% of business UK R&D expenditure in 2015 and the total BERD ratio was 1.1% of GDP compared with 2% in Germany.

The Bruegel think-tank in Brussels noted last month that "China’s services market, though large and promising to any potential entrants, is very difficult for foreigners to penetrate. Except for Australia and New Zealand, and two Asian countries — Japan and Korea — all other countries do less than 5% of their services trade in China...In Europe, Denmark and Germany have the closest services trade relationships with China, but the size of this trade is in general very limited: only about 3% of Danish and German services exports are sold to China."

Net UK services exports to China account for only 2.5% of the UK’s total services trade surplus, and 0.12% of UK GDP.

British headquartered banks HSBC and Standard Chartered are already struggling with slow growth in Asia.

British ministers are excited that the Trump administration may expedite a free trade agreement but Trump may not know yet that the US has a persistent deficit with the UK!

The Brexiters will discover the hard way that there are no easy pickings on the international trade tree.

George Osborne, the chancellor, in 2012 set a target to double the value of UK exports to £1tn by 2020. The value was £515bn in 2015. However, the target will not be achieved as most of the world’s trade is in goods and the UK is only 10th in the global league table when it comes to merchandise exports, lagging behind smaller economies such as South Korea.

Germany has the advantage of producing products that are in demand by emerging economies.

The UK as Europe's top destination for FDI (foreign direct investment) projects, is also imperilled. 

Prime Minister May's threat on Tuesday to walk away from a deal with the EU if necessary, cheered the Brexiters but the facts show that it would be a reckless move.

For example some of the global supply chain exports from the UK cross the UK border more than once!

(See difference here between plain and plane sailing!)