Brexit made UK less competitive and open, new study claims

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23rd June 2022

Bite-sized business news from the UK and beyond

Good morning Glastonbury kicked off yesterday for the first time in three years. The iconic music festival will see more than 200,000 people descend on Worthy Farm over five days with acts including Sir Paul McCartney, Billie Eilish and Kendrick Lamar. In the past 25 years the average age of performers has steadily risen from 26 in 1997 to 45 in 2022.

Today's stories

Brexit made UK less competitive and open, new study claims
Kellogg plans three way split

ECONOMY
Brexit made UK less competitive and open, new study claims

What happened?
Brexit has damaged the UK by creating a less competitive and open economy which will ultimately lead to a poorer and less productive society. That’s according to a new report by the economic think tank the Resolution Foundation.

On the sixth anniversary of the Brexit referendum the Resolution Foundation has delivered a bleak report on the subsequent fallout.
It says leaving the EU represented the largest change in the UK’s relationship with the rest of the world in nearly 50 years. The decision changed the way the UK trades with the EU, its biggest trading partner, as well as how people and live, work and travel between the respective regions.

One of the main concerns over Brexit was that it would reduce the amount of trade between the UK and EU but the study says that this hasn’t been as bad as some predicted. However UK trade openness – measured as trade as % of total economic output - has taken a hit.

Between 2019 and 2021, it fell by 8%, significantly more than peers. The study also found that the impacts on trading go beyond just Europe. The UK has lost out in international trade to the US, Japan and Canada.

Some industries and regions will feel the pain more than others. Fishing is forecast to be the hardest hit sector, reducing by 30% due to new barriers to selling its fresh products to its main customers in the EU.

The North East, already one of the poorest regions in the UK, is predicted to fall even further behind as its firms are particularly reliant on exports to the EU.

What next: The Resolution Foundation has warned the effects of Brexit are far from over and will take years to play out. It says the long-lasting legacy of Brexit is likely to be slower wage and productivity growth over the next decade driven by lower trade and investment. Unwelcome news as the UK already faces an unprecedented cost of living crisis with inflation at a 40 year high.

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CONSUMER
Kellogg plans three way split

What happened?
This week Kellogg announced that it’s splitting into three independent companies that will focus on cereal, snacks and plant-based foods respectively. The food giant hopes the move will help each of these distinct areas grow and become the best Kellogg trio since Snap, Crackle and Pop.

How did we get here?
Kellogg may be best known for its range of cereal including Corn Flakes, Coco Pops and Frosties but the real money maker and high growth area for the group is snacks.

Kellogg had net sales of $14.2bn in 2021, and 80% of that came from the snack division which manufactures a suite of brands including Pringles and Nutri-Grain. 17% came from cereal sales which have slowed down as people opt for eating breakfast outside of the home. Kellogg’s plant-based foods business brought in the remaining 3% of sales.

Three is better than one
By splitting the group into three each company will have dedicated resources which will allow them to innovate more and grow faster, without competing against each other internally.

Kellogg’s break up follows in the footsteps of other huge multinational companies. Last year consumer goods giant Johnson & Johnson and manufacturer General Electric also announced break up plans in a bid to sharpen their focus and thereby growth.

Stat of the day

UK inflation ticked up 0.1% to 9.1% in May, another 40 year-high

Interesting links from around the web

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How the utility room became the new status symbol

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Brexit made UK less competitive and open, new study claims

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Ocado taps market for £575m fundraise

Gov tightens buy now pay later rules

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