UK Manufacturing Post Brexit and Covid-19

The trajectory of UK manufacturing output since 2019 has been both dramatic and puzzling. The sector contracted sharply in 2020, partly due to Covid-19, but many commentators attributed the weakness to Brexit, which had been widely expected to reduce manufacturing exports and curtail output. The data suggest strongly that the swings in manufacturing output have resulted from Brexit-related timing distortions. However, comparing trade data for the non-EU with data for the EU countries does not suggest a significant persistent worsening in the trade balance due to Brexit. Instead, it appears that the excess of domestic demand over turgid supply in the United Kingdom is behind a bigger real net trade deficit compared with 2019.