The UK’s departure from the EU has caused significant damage to its trade links with the EU, resulting in a £27 billion loss in the first two years. As policymakers prepare for the next phase of the Trade and Cooperation Agreement, it is crucial that they consider the needs of all businesses, regardless of size.
The Impact of Brexit on UK Trade: A Review of the First Two Years
The United Kingdom’s exit from the European Union has had a significant impact on its trade links with the EU. According to a recent review, the damage caused by Brexit to trade with the EU cost the UK £27 billion in the first two years.
Trade Barriers and Their Effects
Researchers at the London School of Economics (LSE) conducted a study using data from over 100,000 firms. They found that trade barriers had been particularly devastating for small businesses, with thousands forced to stop trading with EU nations altogether. The academics also discovered that by the end of 2022, total British goods exports had fallen by 6.4%, while imports fell by 3.1%.
Large Firms vs. Small Businesses
The study highlighted a significant disparity between large and small firms in their ability to adapt to the new trade barriers. Large firms were able to carry on trading with EU partners at the same level, while smaller exporters suffered badly. In fact, over 14,000 of the 100,000 firms examined had quit trading with the EU altogether, with almost all being smaller businesses.
Imports and Exports
Imports held up better than exports after larger firms found ways to source components and raw materials from countries outside the EU. However, this came at a cost, as smaller exporters struggled to compete in a market with increased trade barriers.
The Future of Trade
The authors of the study emphasized that the UK‘s exit from the EU’s single market and customs union had led to immediate declines in exports and imports with the EU. However, they also noted that firms responded to this shock by adapting their supply networks and diversifying export demand, which helped to dampen the fall in overall trade.
Conclusion
The review of the first two years of the Trade and Cooperation Agreement (TCA) has provided valuable insights into the impact of Brexit on UK trade. While large firms have been able to adapt to the new trade barriers, smaller businesses have struggled to compete. As the UK begins negotiations for the next phase of the TCA, it is essential that policymakers consider the needs of all businesses, regardless of size, to ensure a fair and competitive trading environment.
Recommendations
The study’s authors recommend that policymakers prioritize measures to support small and medium-sized enterprises (SMEs) in adapting to the new trade barriers. This could include providing training and resources to help SMEs navigate the complexities of international trade and reducing the administrative burden associated with exporting goods to the EU. By taking these steps, the UK can ensure a more balanced and resilient trading environment that benefits all businesses.
- theguardian.com | Brexit cost UK £27bn in lost trade in first two years, review finds
