EU-UK trade deal continues to stifle trade with 27% drop in exports since 2021

A comprehensive analysis by researchers at the Centre for Business Prosperity at Aston University reveals that negative impacts of the UK-EU Trade and Cooperation Agreement (TCA) have intensified over time.

The new report, Unbound: UK Trade Post Brexit,  also shows a 33% reduction in the variety of goods exported, with the agricultural, textiles, clothing and materials sectors most affected.

To assess the impact of the UK-EU TCA, the authors analysed monthly import and export between the UK and the EU, from January 2017 to December 2023 and separated into pre- and post-January 2021 when the agreement came into force. The monthly data shows a 27% drop in UK exports and a 32% decline in imports from the EU.

Lead author, Professor Jun Du of Aston University says: “The Trade and Cooperation Agreement introduced substantial barriers and there are ongoing and marked declines in the value and variety of UK exports and imports. Without urgent policy interventions, the UK’s economic position and place in the global market will continue to weaken.”

The UK-EU TCA redefined trade and investment rules and market access between the UK and the EU. Since it came into force, the UK government has negotiated several trade agreements, but the EU remains the UK’s largest trade partner.

Exports for most sectors have decreased since January 2021, although the impact is varied. Agrifood, textile and clothing and material-based manufacturing have been among the hardest hit, with substantial declines in both export value and the variety of products exported. At the same time, some sectors such as tobacco, railway and aircraft manufacturing have seen modest increases in varieties of products exported.

On the import side, most sectors have shrunk in both value and variety, particularly agrifood products, optical, textile and material-based manufacturing. A few sectors, for example, ships and furniture, have demonstrated noticeable increases in import product variety.

The large variations across different goods categories and EU trade partners underscore the uneven effects of Brexit and the TCA on UK-EU trade dynamics, highlighting the need to understand the nuances and come up with tailored strategies that address the unique challenges of each sector within the new regulatory environment.

The researchers make recommendations, outlining how sector-specific negotiations, streamlining customs procedures with digital technologies and reducing regulatory divergence could mitigate some of the impacts.

Dr Oleksandr Shepotylo, the report’s co-author says: “Our findings indicate a decoupling of the UK from key EU final goods markets, accompanied by a shift in UK supply chains toward geographically closer EU trading partners for exports and smaller countries for imports.

“This shift raises concerns and underscores the urgent need for a strategic reconfiguration of UK supply chains to maintain competitiveness.”

Professor Du continues: “The TCA has introduced considerable barriers to UK-EU trade, particularly through increased non-tariff measures (NTMs).

“Addressing these issues through targeted improvements to the TCA is crucial to ensuring that UK businesses remain competitive in the European market. A structured, multi-faceted approach is necessary.”

To find out more about these findings, click here