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Markets and the pound liked Boris’ decision: opinion

The legacy of Boris Johnson is that Brexit is not quite done yet, and Polish traders can still do business but the Polish plumber has plenty of work elsewhere.

The markets are cruel when it comes to politics. No sooner has Boris Johnson had to step down than the pound has gone up in value, as had the FTSE 500. Both finished the week up.

The markets don’t like uncertainty, so a move away from a possible constitutional crisis is seen positively. Had the Prime Minister continued to defy the call to stand down from the “men in the grey suits”, the powerbrokers in his party, experts suggested they would have found other ways to remove him, without a constitutional crisis or an election.

Now, according to Oxford Economics, the debate shifts to what the Bank of England will do. Inflation is high, at a 40-year peak of 9.1 percent in May. On the other hand, like elsewhere, there is the threat of a downturn in the economy. “We think the current levels will hold if the global central banks continue to water down their rhetoric over the summer.”

While there is an interregnum, the UK is not likely to push through with any budget plans to support households with tax cuts at least until the end of the year.

Many investors will agree with Brexiteers in saying that Johnson’s promise to “Get Brexit Done” lifted the country out of one of the worst periods of indecisiveness. Fewer decisions were made on investment during the period from the 2016 vote until 2019 than at any other time this decade, according to statistics. And if a British firm made a decision, it was to create European offices to enable trade to carry on undeterred. So along with lifting the uncertainty came greater determination to get business moving and an increase in investment.

One of the successes, if it can be seen as a success, was the delay in implementation of full-scale divorce from the EU and agreeing to a year’s lead-in to the departure. Even now, some of the regulations on the inspection of food imports and exports to the EU for non-members have not yet been enforced on the UK, to the relief of trading partners.

Of course, British exports to the rest of the world have gone down in the last two years. Much of this has to do with the pandemic, which affected the sectors of the UK’s three biggest exports – aviation, automotive and arms. Taking the example of Poland, total trade in goods and services between the UK and Poland was GBP 19.0 billion in 2021, a decrease of 5.9 percent or GBP 1.2 billion since 2020.

However, it is not only exports which have been affected. One of the main problems, when the economy got going again, was with supply. This is where Poland comes in.

Before Brexit, some one in four trucks on British roads were Polish according to UK road traffic statistics. Suddenly late last year Polish drivers and indeed all other Schengen area citizens needed to provide a passport when an id card had previously been sufficient to get through passport control. Added to that, the additional paperwork required simply made it a less attractive prospect to even bother making the trip, especially when their services were in high demand elsewhere.

On the other hand, Polish companies have been good at filling the gaps in British imports left by suppliers from other countries who couldn’t be bothered with the increase in paperwork. And inflation has played a part in that. Michael Dembinski of the British Polish Chamber of Commerce told us that building supplies companies like Fakro windows, a company from Nowy Sącz in southeastern Poland have been able to significantly increase their sales to the UK over the pandemic, as Britons spend their cash on extending their houses rather than on foreign holidays.

It is difficult to divorce Johnson’s legacy from Brexit and party politics and the entertainment of question time grilling is not really closely observed in Poland. And the pandemic was another factor which played a part in attitudes. Going to the UK was fraught with more testing and barriers than other countries – rightly or wrongly, leading to less interest in travelling there.

The number of Poles in the UK began to fall after the 2016 vote. Many Poles who had already spent several years in the UK decided to leave, a process sped up by registration requirements and then by the pandemic.

Added to that, young people wanting the experience of working abroad chose other destinations, while students for whom studying in the UK was an attractive choice, found higher fees for EU citizens less enticing. The Netherlands and Ireland took first place in the choice of foreign study destinations.

So the end of the Johnson era is the end of the early Brexit era. No party in the UK and no successor of Johnson will vote to reverse it any time in the near future, especially after all of the pain induced by getting changes through this far. On TVP World’s Business Arena on Friday Marcin Liberadzki said that “Brexit will stand as a warning to any other country of the pain involved in leaving the European Union.” Of course, without Britain, the EU is not the same Union. It is now a different landscape and its state is currently changing after the Russian invasion of Ukraine.

By David Kennedy

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