‘Sharp decline’ in UK-EU trade following Brexit part of ‘broader decline’ in UK competitiveness, study finds

The UK’s trade with the EU has fallen following its exit from the bloc, while the Trade and Cooperation Agreement (TCA) has caused “severe disruptions in the UK-EU supply chain”, according to a new report from Aston University.

The disruptions caused by the agreement, struck as the UK left the EU, have been particularly pronounced in “consumer and intermediate goods”, say the authors of the report, which examined trade data up to 2023.

On the EU’s side, smaller nations have felt a more pronounced impact from a decline in UK exports than larger European nations.

‘Substantial’ decline

From 2021 to 2023, the report says, “monthly data show a 27% drop in UK exports and a 32% reduction in imports to and from the EU”.

“Even when considering annual data to smooth short-term fluctuations, the declines remain substantial—17% for exports and 23% for imports.”

The TCA itself is having “profound and ongoing stifling effects” on UK-EU trade, it adds. The disruption to supply chains has been “heavy”, while there has been a shift towards local production in the UK as it decouples from EU supply chains.

However, “despite the TCA’s dampening effect on UK exports, the UK remains dependent on the EU for intermediate and capital goods”.

Intensifying effects

The report’s authors also contend that the effects of the TCA, compared with EU membership, are worsening over time:

“The negative impacts of the TCA have intensified over time, with 2023 showing more pronounced trade declines than previous years. This suggests that the transition in UK-EU trade relations post-Brexit is not merely a short-term disruption but reflects deeper structural changes likely to persist.”

UK exports to non-EU markets have increased, likely as a result of non-tariff measures and rules of origin restrictions, the report adds. This has been particularly pronounced in the agrifood, wood, textile and footwear industries.

The authors note that their previous research has found that UK exports have fallen “not only in total trade value but also in the variety of exported goods”, which has had an effect on trade with both the EU and the rest of the world.

“These findings point to a broader decline in UK trade competitiveness and highlight the significant challenges UK firms are facing.”

Mitigation

The report’s authors propose “targeted improvements” to address the “crucial” but “formidably difficult” challenges raised by the TCA.

It calls for a sector-specific approach to renegotiation with the EU, stating that, for instance, a new veterinary agreement with the bloc “could lead to tangible benefits”, while other sectors including manufacturing could also benefit from attention.

There is also a need to address inefficient and overly complex customs procedures by embracing digital trade, the report suggests:

“Digitalisation offers a clear path forward – by adopting advanced customs platforms that automate documentation, provide real-time tracking, and integrate seamlessly with EU systems, the UK can create a more efficient trading environment.

“This modernisation should be a priority in any future negotiations with the EU, ensuring smoother trade flows and expanded market access for UK exporters. The UK’s leadership in digital customs could also offer a competitive advantage in global trade.”

Other policy proposals include harmonising regulatory schemes with the EU, investing in trade infrastructure, including ports, and strengthening domestic supply chains by reshoring production through incentives, including tax breaks and grants.