A report from the Centre for Economic Performance (CEP) has laid bare the significant damage Brexit has inflicted on British exports.
According to the study, Boris Johnson’s Trade and Cooperation Agreement (TCA) has cost the UK an estimated £27 billion in lost goods exports in 2022, representing a 6.4% overall decline. The hardest-hit sector was exports to the EU, which fell by 13.2% in value.
The findings arrive as the UK government prepares to renegotiate its Brexit deal with the EU in the new year. However, these talks are expected to face pressure over potential compromises, such as allowing some jurisdiction for the European Court of Justice in the UK and reinstating free movement for young people.
The CEP, based at the London School of Economics, analyzed data from over 100,000 firms to measure the gap between current export levels under the TCA and what would have been expected if the UK had remained in the EU.
According to the findings, approximately 14% of firms (around 16,400) that had previously exported to the EU stopped doing so altogether after the TCA came into force in January 2021.
For firms that continued trading, the smallest businesses — those with six or fewer employees — saw the average value of their exports to the EU fall by 30%. Medium-sized firms (with 17 to 40 employees) experienced a 15% decline.
By contrast, the largest firms, employing more than 107 people, were largely unaffected. According to the report, “The success of larger firms in maintaining their export levels dampened the decline in aggregate trade.”
However, the overall trend points to a worrying post-Brexit reality for small and medium-sized enterprises (SMEs). The report highlights the impact of new border regulations, customs checks, and product labeling requirements, such as the need to mark goods as “not for export to the EU.”
Experts Sound the Alarm
Marco Forgione, Director General of the Chartered Institute of Export & International Trade, described the report’s findings as a confirmation of long-standing concerns.
“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 SMEs 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.”
Marco Forgione
Larger firms have fared better, partly because they often have dedicated customs departments to navigate the challenges. However, even they are not immune to Brexit-related issues. Forgione cited the example of a major chicken exporter that recently had four shipments rejected over a missing digit on a customs form, costing the company over £80,000.
“There is a real danger EU-based producers will stop trading with the UK. We need to focus on giving SMEs in the UK and EU the expertise and knowledge they need to trade competitively and compliantly with each other, as the EU and UK markets are vital to consumers and businesses on both sides.”
Marco Forgione
The CEP report highlights the uneven playing field created by the TCA. While larger firms may weather the storm, SMEs are struggling to adapt. The loss of these exporters could further widen the trade gap and weaken the UK’s economic ties with its largest trading partner.
As such, while talks to reset the Brexit deal continue, the findings underscore the urgency of addressing these trade barriers. Without significant action, experts fear the damage to UK-EU trade relations could deepen, with long-lasting consequences for businesses and consumers.
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