EU-UK trade plummets after Brexit

Data for the first year after Brexit makes it clear that The warnings about the significant impact on trading it will have are real: trade relations on both sides of the English Channel will sharply decline in 2021, especially for SMEs.

A UK study in European Change, conducted by researchers at University College London, the London School of Economics and the University of Cambridge, published today, shows that The intensity of trade between the UK and the EU has fallen sharply in the past year, having hit its highest level in the years before Brexit.

The study cited by compares UK and European trade with each other and with the rest of the world, to avoid distortions caused by the slowdown imposed by the coronavirus pandemic. With this data, the report says, “we found no evidence that Brexit reduced the UK’s trade with the EU in relation to the rest of the world prior to the adoption of the Trade and Cooperation Agreement (TCA)”, an agreement between the two parties which entered into force on 1 January 2021 on when the separation becomes effective. “However, the introduction of the ACC resulted in major disruption of trade between the UK and the EU,” the researchers wrote.

One of the most curious pieces of data is that UK imports from the EU were the type of exchange most affected, with a sudden drop of 25% shortly after the agreement took effect and which persisted through 2021.. This decline comes despite the fact that the UK has since not introduced all of the customs controls imposed by UK law itself on imports, and that the EU is applying in the opposite direction.

Given the case of scarcity suffered by the country over the past year even without control, placing all these barriers may further curb imports and jeopardize supply again, which is why London has extended indefinitely for more than a year from its entry into force. .

Broken SMEs

However, the biggest long-term risk is a decline in exports. The data show that the main impacts in this regard are SMEs, which are the weakest link in the business sector, and exports to smaller European countries, where markets are not very profitable.

Thomas Prayer, co-author of the paper and doctoral student at the University of Cambridge, told the Financial Times that “it appears the UK has stopped selling a lot of products to smaller EU countries.” The explanation is simple: the largest companies and those operating in the largest European markets can create economies of scale that offset the additional costs caused by ACC. But the smaller ones, or those that export to places like Lithuania or Cyprus, can’t afford it.

The big question is whether this effect will be permanent or just a minor glitch as both sides learn to live with the new trading rules. But signs make it clear that, today, those who warned that Brexit would be a serious economic blunder appear to be completely right.

Roderick Gilbert

"Entrepreneur. Internet fanatic. Certified zombie scholar. Friendly troublemaker. Bacon expert."

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