British exports have been hit with a £27bn loss as a result of the Brexit trade agreement with the EU, a new paper by the Centre for Economic Performance (CEP) has revealed.
Former PM Boris Johnson’s Trade and Co-operation Agreement (TCA) with Brussels led to a slump in total goods exported from the UK by an estimated £27bn (or 6.4%) in 2022, largely driven by a 13.2% fall in the value of goods exported to the single market.
Using customs data collected by HMRC to analyse for the first time, the research found 14% of companies (around 16,400) that had previously exported to the EU stopped doing so after the TCA came into force in January 2021.
Smaller businesses were worst hit by the impact, but “all but the top fifth of firms” were negatively impacted by the Brexit deal, the CEP noted.
Among firms that continued exporting to the EU, the trade agreement reduced the average value of EU exports by 30% for the smallest fifth of firms (with six or fewer employees) and by 15% for the middle fifth (between 17 and 40 employees).
By contrast, exports by the top fifth of firms, those with more than 107 employees, were not affected by the TCA, analysis showed, highlighting “how larger firms have adjusted to the new trade relationship better than small and medium-sized firms”.
The success of larger firms in maintaining their export levels dampened the decline in aggregate trade, CEP said.
“This report reinforces the key points we have been raising with government since the TCA came into force,” said Marco Forgione, director general of the Chartered Institute of Export & International Trade.
”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.”
Read more: British food and drink exports slump in first half of year on EU trade barriers
By contrast, larger businesses tend to have departments dedicated to customs to ensure the smooth transit of goods between the UK to the EU, he said, although “even they are not immune to problems”.
“We are working with a major exporter of chicken products, and just last week had four shipments rejected because of one missing digit on a customs form. That cost them over £80,000.”
There was a “real danger” many EU-based producers will stop trading with the UK as the new Border Target Operating Model requirements come into full effect from the end of January 2025, Forgione warned.
“We have already seen delays, rejected shipments and spoiled goods at the UK border because animal and plant product checks have been introduced this year.”
The CEP report also showed the Brexit trade deal reduced imports from the EU, but the decline was partially offset by higher imports from outside the bloc.
Researchers estimate the TCA reduced total imports from all countries by 3.1%, which is equivalent to £20bn lower imports in 2022.
Fmcg trade is among the worst hit, with British food and drink exports reaching some of their lowest levels on record this year.
A recent Centre for Inclusive Trade Policy (CITP) report found exports of UK food goods to the EU had fallen by 16% compared with pre-Brexit averages.
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