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UK-EU exports fell by 15% in first half of last year because of Brexit trade friction

UK exports to the EU fell 15.6 percent, or £12.4 billion, in the first six months of last year as trade frictions over Brexit hamper the ability of UK companies to trade. according to new research.

Aston University’s research found that requirements related to EU health and safety standards for products such as food and chemicals (SPS requirements) and technical specifications for machinery (TBT requirements) are the most damaging to the overall UK economy. export.

The SPS requirements resulted in an export decline of 13.7 percent compared to 2019 in the first half of 2021, while the TBT requirements resulted in a further decline of 1.9 percent.

The authors assessed the impact of the trade and cooperation agreement, which allows the continued purchase and sale of goods between the UK and the EU without tariffs, and then isolated the extent to which the new trade barriers were responsible for the decline in exports.

However, while exports between the UK and the EU have returned to pre-pandemic levels, this does not mean “the UK is on track,” said Professor Jun Du, co-author and professor of economics at Aston Business School.

She added that other countries with similar economies have shown much stronger growth in trade activity over the same period, adding that this was partly due to “the impact of non-tariff measures” on UK exports.

John Springford, deputy director of the Center for European Reform noted that “there has been some disagreement among economists about the extent to which the TCA has reduced British trade. But, he added, “everyone agrees that it has made the UK economy considerably more closed”.

Line chart of exports to the EU, $USD billion showing exports to Europe, would have been much higher if the UK had stayed in the EU

William Bain, head of trade policy at the UK Chambers of Commerce, said the findings are in line with “our own evidence that SPS requirements have had a very negative impact on UK exports to the EU”.

Line chart of Index of Export Values, December 2020=1 showing that the UK's trade with the EU lagged the rest of the world in 2021

Du said the study found that trade barriers before Brexit would have a long-lasting effect on export activity. “If it was just a matter of business adjustment” to the new regime, “they probably figured out what to do after a few months”.

She added that the findings showed the new trade frictions were “not teething problems.”

Bain agreed, noting that “traders across Britain have consistently told us how these requirements have reduced their competitiveness”.

However, the study also found that some companies exposed to these frictions have been able to adapt by sending their products to non-EU countries. As a result of the barriers, exports to non-EU countries increased by up to 7 percent for goods subject to SPS requirements and by 1.5 percent for goods affected by TBT.

According to Du, there may have been less diversion of TBT-affected goods, as they are “more likely to be specific to a product or process” and therefore “more difficult” to find alternative markets for.

Bain said further negotiations between the EU and the UK were needed to reduce the impact of trade barriers so that “deadweight costs” on exports, such as food, “can be loosened and traders can get back to growing their businesses”.

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