Brexit is ‘stifling’ exports and imports, report finds

Brexit is having a “profound and ongoing” impact on Britain’s trade with the EU, with goods exports and imports still being hit by the bureaucratic barriers erected by leaving the single market, research has shown.

Modelling by economists at Aston University has estimated that annual exports to the EU are 17 per cent lower and imports 23 per cent behind where they would have been if Brexit had not occurred, with negative impacts increasing during 2023.

“The findings reveal a sharp decline in both UK exports and imports with the EU, underscoring the enduring challenges posed by Brexit on the UK’s trade competitiveness,” the authors wrote in the paper published on Tuesday.

Its findings are likely to fuel calls for the government to be more ambitious in improving trade ties with Brussels.

The research was led by Jun Du, a professor of economics at Aston who has modelled Brexit impacts since the EU-UK Trade and Cooperation Agreement (TCA) came into force in January 2021.

Labour has ruled out rejoining the EU single market or forming a customs union, but promised in its manifesto to “tear down” barriers to trade with Europe by seeking other improvements.

These include a so-called veterinary agreement to reduce border checks on plant and food products, a deal to improve access for touring musicians, and steps to make it easier for UK professionals such as architects and lawyers to practise in the EU.

The research paper examined the extent to which Brexit had impacted individual sectors including agrifoods, wood, textiles and footwear, with larger companies in sectors such as autos and aerospace showing relatively more resilience to Brexit effects.

“These findings [indicate] the profound and ongoing stifling effects of the TCA on UK-EU trade,” it added. “The analysis reveals a heavily disrupted and weakening UK-EU supply chain post-TCA.”

The Aston University research builds on work by economists at the Resolution Foundation think-tank that warned that Brexit was squeezing the UK out of higher-productivity manufacturing activities that were reliant on integration with EU supply chains.

Sophie Hale, principal economist at the Resolution Foundation, said the findings show the “economic damage is far from over”, though it is unclear how much of the decline is caused by shifting to new trading arrangements, and how much is because of regulatory divergence with the EU.

“Either way, what is clear is the urgent need for Labour to act quickly on their UK-EU reset strategy to prevent further deterioration and protect the UK’s economic interests,” she added.

The research used sophisticated economic modelling to create a “synthetic UK”, sometimes known as a doppelgänger UK, that “exports and imports identically to the UK, but did not experience the change in its trade relationships with the EU”.

John Springford, a trade economist at the Centre for European Reform think-tank, said that while Du’s results differed from some other academic studies, the findings were in keeping with overall trade data.

“Jun Du and her colleagues’ paper fits with what we know in the aggregate data about UK goods trade: exports and imports to all destinations, in both the EU and the rest of the world, have grown more slowly than peer economies,” he said.

Of particular concern is Du’s finding that the UK’s relative performance in goods trade had deteriorated in 2023 when compared with similar economies, he added.

Du said the government should focus on three key areas to improve trade ties: specific sectoral negotiations in areas such as agrifoods and textiles, better use of digital technologies to streamline border transactions, and closer regulatory alignment with the EU.

However, pro-EU groups such as the European Movement, a pressure group that campaigns for a closer relationship with the EU, are urging the government to be more ambitious in its attempts to deepen trade ties with Brussels, including rejoining the EU single market. 

“The big question for Keir Starmer is whether he is really as serious about economic growth and taking ‘tough decisions’ as he claims. Because if so, he is going to have to get very tough on his own red lines,” said EM chair Mike Galsworthy.

Responding to the report, the Cabinet Office said the government would “look forwards, not backwards” when addressing the challenges created by Brexit, but would be sticking to the red lines set out in the manifesto. 

“We will work to improve our trade and investment relationship with the EU and tear down unnecessary trade barriers, while recognising that there will be no return to the single market, customs union or freedom of movement,” it added.