UK-EU exports fell by 15% in first half of last year because of Brexit trade friction

UK exports to the EU fell by 15.6 per cent, or £12.4bn, in the first six months of last year because of Brexit trade frictions hampering the ability of British businesses to trade, new research has found.

The study by Aston University found requirements surrounding EU health and safety standards for products such as food and chemicals (SPS requirements) and technical specifications for machinery (TBT requirements), have been the most detrimental to aggregate British exports.

SPS requirements resulted in a 13.7 per cent reduction in exports on 2019 levels over the first half of 2021, while TBT requirements accounted for a further 1.9 per cent decline.

The authors assessed the impact of the Trade and Cooperation Agreement, which allows goods to continue to be bought and sold between the UK and EU without tariffs, then isolated the extent to which the new trade barriers were responsible for the decline in exports.

Although exports between the UK and the EU have returned to pre-pandemic levels, this does not “mean that the UK is on track” though, said Professor Jun Du, co-author and professor of economics at Aston Business School.

She added that other countries with similar economies have shown much stronger growth in trade activity over the same period, adding this was partly due to “the impact of non-tariff measures” on British exports.

John Springford, deputy director of the Centre for European Reform noted there was “some disagreement among economists about the extent to which the TCA has reduced UK trade. But, he added, “all agree that it has made the British economy significantly more closed”.

William Bain, head of trade policy at the British Chambers of Commerce, said that the findings accord with “our own evidence that SPS requirements have had a deeply negative effect on UK exports to the EU”.

Line chart of Index of export values, December 2020=1 showing The UK's trade with the EU fell behind the rest of the world's in 2021

Du said the research noted Brexit trade barriers would have a long-lasting impact on export activity. “If it was just a matter of business adjusting” to the new regime, “they probably would have figured out what to do after a few months”.

She added that the findings demonstrated that the new trade frictions were “not teething problems”.

Bain agreed, commenting that “traders all over Great Britain have consistently told us how these requirements have reduced their competitiveness”.

However, the study also found that some businesses exposed to these frictions have been able to adjust by sending their products to non-EU countries. As a result of the barriers, exports to non-EU countries increased by up to 7 per cent for goods subject to SPS requirements and 1.5 per cent for those impacted by TBT.

According to Du, there may have been less redirection of TBT impacted goods, because these “are more likely to be specified for a product or process” and are therefore “more difficult” to find alternative markets for.

Bain said that further negotiation between the EU and UK was required to reduce the impact of trade barriers so that “deadweight costs” on exports, such as food, could be “cut loose and traders can get on with growing their businesses once more”.