UK exports have declined by £27 billion since Brexit, with smaller businesses hit the hardest by new trading barriers.
Recent analysis from the Centre for Economic Performance, a think tank based at the London School of Economics, has revealed that Boris Johnson’s Brexit trade and cooperation agreement (TCA) has led to a £27 billion drop in total goods exports from the UK.
It also found that 16,400 small and medium UK firms (14 per cent) that had previously exported to the EU stopped doing so after the agreement at the start of 2021. However, the impact on the largest companies was “insignificant” as they were able to prepare for the change in trade relations and lock in fixed costs.
The research claims that among firms that continued exporting to the EU, the TCA reduced the average value of EU exports by 30 per cent for the smallest fifth of firms (with six or fewer employees) and by 15 per cent for the middle fifth (between 17 and 40 employees).
By contrast, exports by the top fifth of firms, those with more than 107 employees, were not affected by the TCA.
“Most of the firms whose exporting business has suffered are smaller ones,” the report said.
“Importers and larger exporters adapted to the shock in ways that dampened the reduction in trade. Consequently, aggregate trade has, at least so far, been more resilient to Brexit than forecasters predicted.”
The shocking analysis comes as the Labour government prepares to begin talks in the new year for a Brexit deal reset with the EU. Earlier this month, Rachel Reeves admitted Boris Johnson’s Brexit deal “reduced trade flows” between Britain and Europe.
A co-author of the new report Kalina Manova said: “The TCA has disrupted firms’ relationships with firms they export to and import from. Firms’ performance in the medium to long run will hinge on their ability to maintain supply networks and diversify export demand in the face of higher and uncertain non-tariff barriers to EU trade.”
Marco Forgione, director general of the Chartered Institute of Export and International Trade added: “This report reinforces the key points we have been raising with government since the TCA came into force.
“There has been a significant drop in SME’s trading with the EU, these businesses find the new requirements too complex, they’ve reacted to the many stories of problems with customs processes, and they don’t have the expertise or staff to cope with the extra rules and regulations now in place.
“Although larger firms tend to have departments dedicated to customs to ensure the smooth transit of goods between the UK to the EU, there have been less negative impact from them, but even they are not immune to problems.
“We are working with a major exporter of chicken products, and just last week had four shipments rejected because of one missing digit on a customs form. That cost them over £80,000.”
“There is a real danger EU-based producers will stop trading with the UK,” he warned.
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