A new report from the London School of Economics has found that UK goods exports dropped by £27bn (6.4%) in 2022 in the first year following the UK’s full departure from the EU.
A drop in exports to the bloc were the main contributor, falling by 13.2% in the first year after the post-Brexit free trade deal between the UK and EU had taken effect.
The research from LSE’s Centre for Economic Performance (CEP) also found that 14% of the firms that exported to the EU before the Trade and Cooperation Agreement (TCA) entered force on 1 January 2021 have subsequently stopped sending goods to the bloc.
Smaller firms were particularly affected, with the value of exports among the smallest firms (those with six or fewer employees) falling by 30%. By contrast, those with more than 107 employees were largely unaffected by the TCA.
Thomas Sampson, co-author and associate professor of economics at LSE, said:
“The TCA has been a disaster for small exporters, many of which have simply stopped exporting to the EU.
“At the same time, larger firms have adapted well to the new trade barriers. Consequently, total exports have, at least so far, declined less than expected.”
The CEP claims that the report, titled ‘Deep Integration and Trade: UK Firms in the Wake of Brexit’, is the first to study the impact of Brexit on UK trade using customs data collected by HMRC.
The analysis found no evidence of either a positive or negative effect on firms’ exports to countries outside of the EU, meaning the 6.4% reduction in overall exports is “entirely due to lower exports to the EU”.
The post-Brexit deal has also seen a reduction in imports from the EU, but it says that this has been “partially offset by higher imports from outside the EU”.
The study found that overall imports came down by 3.1%, or £20bn, in 2022.
Post-Brexit rules for goods entering Britain from the EU were introduced in phases under the UK’s Border Target Operating Model (BTOM) whereas the EU implemented regulations from the outset.
Sanitary and phytosanitary measures were largely bought in this year, while a requirement for safety and security data to be provided on goods entering Britain from Europe will only come into effect at the end of January 2025.
The equivalent rules for goods leaving Britain for Europe came in immediately after the end of the transition period between Brexit (31 January 2020) and the implementation of the TCA (1 January 2021). Single market rules continued to apply for UK-EU trade during the transition.
There is evidence to suggest that many EU-based producers will stop trading with the UK as the new UK BTOM requirements come into effect, in full, from the end of January 2025.
Logistics companies have already reported delays, rejected shipments and spoiled goods at the UK border because animal and plant product checks have been introduced this year.