Brexit: EU firms ‘lost greater volume of trade than UK exporters’, report finds

The first year of the UK’s post-Brexit trade agreement with the European Union (EU) saw firms on the continent lose a greater percentage volume of trade than exporters from the UK, according to research.

The study of 1,200 products, by the Centre for Economic Performance (CEP) at the London School of Economics and Political Science, found UK imports fell by 25% relative to those from the rest of the world during 2021.

It reported that exports to the bloc avoided a sustained decline by the same measure, with a smaller and only temporary drop.

However, it warned that trading relationships with the continent did suffer, with small firms in particular struggling after the Trade and Cooperation Agreement (TCA) began on 1 January 2021.

The report said: “We find a smaller and only temporary decline in relative UK exports to the EU (after Brexit), but nevertheless a large and sustained drop in the extensive margin of exports, driven by the exit of low-value relationships.”

Report co-author Rebecca Freeman added: “Although it is surprising that imports were hit harder than exports during the first year of the TCA, it would be a mistake to conclude that exporters were unaffected.”

It supported claims by business groups, the study said, that the departure from the EU’s single market and customs union had proved detrimental to small firms.

Thomas Sampson, another co-author and associate professor of economics at LSE, said: “The TCA has increased trade costs, leading to a fall in imports from the EU and reducing the number of products exported to the EU by UK traders.

“These changes make the UK a harder place to do business.”

The report did not seek to examine the long term effects of the TCA though the new regime was further complicated by pandemic-related disruption witnessed globally that led to backlogs at ports.

The report was released days after figures showed a partial recovery in freight traffic between the UK and Dublin port – Ireland’s largest – during the first three months of 2022.

A spokesperson for the government said of the findings: “Through our Export Support Service, expanded export academies and a landmark export strategy, we are ensuring that businesses of all sizes have the support they need to trade effectively with Europe and seize new opportunities as we strike trade deals around the world.

“Given the impact of COVID-19 on global supply chains, we have been introducing import controls in phases throughout 2022 in order to give businesses more time to prepare.

“Through our targeted multimedia campaign and a series of sector-based webinars, businesses are also signposted to the relevant import information and support to help them.”