Politics

Brexit has worsened UK supply chain crisis, government’s own spending watchdog says

Brexit has made the shortages hitting the UK economy worse compared to the rest of the world, the government’s spending watchdog has said.

Ministers have repeatedly blamed a “global crisis” for empty shelves and depleted petrol stations across the country – confusing international observers who are not facing similar problems at home.

But the government was contradicted in dramatic fashion on Wednesday by its own Office for Budget Responsibility.

In documents released alongside Rishi Sunak’s budget the fiscal watchdog said: “Supply bottlenecks have been exacerbated by changes in the migration and trading regimes following Brexit.

“Energy prices have soared, labour shortages have emerged in some occupations, and there have been blockages in some supply chains.”

The OBR also pointed the finger at Brexit for suppressed trade, noting that while goods trade with the rest of the world had recovered to 7 per cent below pre-pandemic levels, trade with the EU was still down more than twice as far at 15 per cent.

Paul Johnson, director of the respected Institute for Fiscal Studies think-tank, told BBC News: “You will also see in the OBR document evidence of quite a big reduction in trade with the European Union, so the continued impact of the additional trade barriers that we have with the European Union is taking its toll on business as well.”

Mr Johnson also said the OBR’s estimated reduction in trade, productivity, and living standards from Brexit was “bigger than the expected long-run effect of the pandemic”.

Other factors behind the crisis include a global surge in demand as the world comes out of lockdown and a lack of UK energy buffer stocks, particular for natural gas.

During his speech Rishi Sunak said “demand for goods has increased more quickly than supply chains can meet” as economies around the world reopened, while global demand for energy has also “surged”.

The Chancellor said: “In the year to September, the global wholesale price of oil, coal and gas combined, has more than doubled. The pressures caused by supply chains and energy prices will take months to ease.

“It would be irresponsible for anyone to pretend that we can solve this overnight. I am in regular communication with finance ministers around the world and it’s clear these are shared global problems, neither unique to the UK, nor possible for us to address on our own.”

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