A study by the London School of Economics [LSE] Centre for Economic Performance [CEP] has shown that both UK imports from the EU and British exports to the trading bloc were adversely affected over 2021, the year that new Brexit trading arrangements came into force.
The report’s analysis of trading patterns for 1,200 different products showed that there was a “sharp drop” in the number of trading relationships between UK exporting businesses and European importers over the year, while the trading relationships that were maintained were said to be “lower-value”.
LSE’s Thomas Prayer explained: “It appears the UK simply stopped selling a lot of products to smaller countries in the EU.”
While UK exports to the bloc did enjoy an uptick since an initial drop-off at the start of 2021, the study suggests that this recovery was driven by an increase in sales of expensive large machinery products.
Indeed, in the background, the total variety of goods sold between the UK and EU dropped by 30 per cent over the whole year.
However, the biggest surprise to the report’s authors was the outcome for UK imports of EU products. Imports from the EU decreased by 25 per cent relative to elsewhere in the world over 2021, even though the UK government delayed the start of most customs checks on EU goods until July 2022 and could still push them back further.
Researchers suggested that additional red tape, customs requirements and higher costs may have been deterring factors for European businesses looking to export goods to the UK, which ultimately contributed to what the report called a “major shock” to UK-EU trade over 2021.
Commenting on the effect of new Brexit trading arrangements, the Office for Budget Responsibility has suggested that their impact saw the UK “miss out” on some of the economic rebound effects after the Covid-19 pandemic.
Furthermore, with the LSE report only reflective of the opening year of trade under new Brexit rules, industry has urged government to ensure that the same difficulties are not allowed to persist longer-term.
Martin McTague, chair of the Federation of Small Businesses, said that small business needed to be “at the centre of free trade agreements” and called on the government to help firms with the greater administrative burden.
However, the government insists that it is already providing businesses with the necessary support to continue trading with the continent, and to “seize new opportunities” which would be created by fresh trading agreements with other nations.
A government spokesperson commented: “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.”
Photo by Rocco Dipoppa on Unsplash
