Brexit has had a wide range of consequences for relations between the UK and EU, but the scale of its impact on trade is underlined by a recent analysis from the Centre for Business Prosperity at Aston University, which shows that exports to the EU fell by an average of nearly 23% in the 15 months after the EU-UK Trade and Cooperation Agreement was signed.
The research shows that there was a significant contraction in the goods exported to the EU, with an estimated loss of over 40% of product varieties. This has significant implications for the productivity of the UK and its future exports. The researchers believe that the data highlights the need for an urgent debate from politicians about the future of UK trade.
Alternative model
The researchers compared the post-agreement trading data with a model they created to highlight what might have been the case had the UK remained in the EU. This allowed them to isolate the impact the new trading arrangement was having on UK exports.
“What we are seeing is the effect of Brexit on exports; and that is persisting. It’s not diminishing, and exports have yet to show signs of recovering,” they explain. “Until this serious problem with exports is openly acknowledged and discussed, we won’t see any necessary actions being taken.”
Imports seemed to perform rather better than exports, as, after an initial drop in imports from the EU, there was a recovery over the study period. This suggests that UK businesses were able to adjust to the new rules relatively quickly. That exports enjoyed no such recovery suggests more fundamental factors are at play.
“It seems that the UK can buy, but it can’t sell—and that’s reinforcing the problem of Brexit,” the researchers explain. “A reduction in import bottlenecks might help exports to rebound, but this recovery is likely to be offset by the rising costs of imports.”
They found that up to 42% of the product varieties that were previously exported to the UK have vanished in the 15 months since January 2021. They believe this is likely to be because a large number of exporters stopped exporting to the EU, with those that remained doing so trimming their product ranges.
“The product varieties that have disappeared are mostly those with low export value—we know this because the average export value increased as the number of varieties declined,” they explain. “These products are the ones typically exported by small firms or new exporters, or are exported to new markets. And It’s those smaller businesses that would normally export much more in future, as they grow their volumes and products—so that’s the UK’s future export pipeline being affected, which has bleak implications.”
The data highlights the true losses associated with Brexit, and in particular the damage it has caused to the competitiveness of the UK in global trading. Not only are exports down but also the range of products being exported has declined, which promises to have a significant long-term impact on the British economy.
“Debate is essential so that the UK can start to address its current challenges,” the researchers conclude. “Of course, no one is suggesting going back into the EU, but there are collaborations, conversations and discussions that must be had. If the UK’s political leaders don’t acknowledge the facts, they are setting the course towards even longer-term problems.”
