A new report from the Centre for Economic Performance (CEP) at the London School of Economics (LSE) has suggested that the negative effect on UK trade has been smaller than economists expected, but that smaller goods exporters to the EU have suffered most from the new trade costs created by the UK-EU Trade and Cooperation Agreement (TCA).
The report, Brexit and EU Trade, available HERE, cites statistics produced by HM Revenue and Customs (HMRC) which show that the number of firms exporting to the EU fell to approximately 100,000 under the TCA compared to approximately 120,000 in 2019 and earlier years.
The loss of around 20,000 exporters, the CEP argues, is entirely accounted for by small exporters with fewer than 10 employees.
Focusing on trade with EU countries, the TCA has reduced exports to the EU by around 30% for small firms, but it has had no effect on large firms’ exports to the Union.
The UK’s proximity to the large consumer and input markets in EU countries will always present the greatest opportunity for trade, the report argues. The UK therefore faces a basic trade-off: move closer to the EU to increase UK trade and living standards or remain distant from the EU and continue paying the price of new and emerging trade barriers.
“Brexit is still playing out”, the CEP highlights. “The UK continues to deviate from EU policy due to active and passive regulatory divergence, which further increases trade costs for UK businesses.”
Furthermore, it goes on, new trade agreements with countries outside the EU cannot compensate for the reduced access to the Union’s single market. “Global Britain” as a strategy for international trade is, the CEP concludes, a fantasy.
