Thread by @DavidHenigUK

Remember, we haven't seen trade barriers go up on such a major trade route in modern history. We didn't know what would happen.

My initial thought is we're seeing how quickly adjustments are made in modern supply chains, starting not surprisingly with fast moving consumer goods.

https://twitter.com/vivamjm/status/1346906780148916233

Similarly another fast moving market, financial services, saw big changes to trade on what was in effect Brexit day one. Other markets with sunk investments are likely to take more time to adjust. scottishfinancialreview.com/2021/01/04/lon…

So there's a trade adjustment, less UK-EU trade almost certainly, not fully compensated with more UK-global trade, and then there will be a UK economy adjustment to this, likely to take some time. But this also means continued investment uncertainty.

It should also be noted that global trade deals, such as with the US, are likely to make almost no difference to UK economic adjustment resulting from UK-EU barriers (as the forecasts show). Because we probably won't be replacing lost participation in European supply chains.

But this all remains speculative. There's the optimistic view that much of the financial services activity, for example, finds a way to stay in the UK. Or a pessimistic one with much worse impact from, in effect, capital flight. Still early days.