The impact of Brexit on UK trade has been a topic of intense debate and analysis since the 2016 referendum. Now, several years after the UK’s formal exit from the European Union, a clearer picture is emerging: the decline in trade between the UK and EU has been significant, with many businesses feeling the effects. A recent research paper from The Centre for Business Prosperity at Aston University Business School, titled Unbound : UK Trade post-Brexit, highlights the extent of this decline and the challenges it presents for businesses navigating the new trade landscape.
A Decline That Wasn’t Unexpected
Brexit brought about a fundamental shift in the UK’s relationship with the EU, transforming what was once seamless, frictionless trade into a complex, paperwork-heavy process. From tariffs and customs checks to regulatory divergence, businesses have faced increased barriers to trade. This was expected, but the scale of the trade decline has been larger than many anticipated.
According to the Unbound paper, UK-EU trade fell sharply in the immediate aftermath of Brexit, with export and import volumes continuing to struggle as businesses adapt to the new normal. UK exports to the EU have decreased substantially, and imports from the EU have similarly faced delays and logistical hurdles. Many businesses have found it difficult to adjust to the new customs clearance procedures and regulatory requirements, leading to longer lead times, additional costs, and reduced competitiveness.
The research paper identifies several factors contributing to the drop in trade volumes:
Why Is Trade Declining?
- Increased Red Tape: One of the biggest hurdles for businesses has been the increased bureaucracy at the border. Before Brexit, goods could move freely between the UK and the EU. Now, businesses must navigate complex customs declarations, VAT considerations, and regulatory checks. This has resulted in slower processing times, added costs, and, in some cases, a reluctance to trade with the EU altogether.
- Tariffs and Non-Tariff Barriers: While the UK-EU Trade and Cooperation Agreement eliminated tariffs on many goods, non-tariff barriers have increased dramatically. Rules of origin requirements, for example, have made it more difficult for businesses to qualify for tariff-free trade, leading to higher costs for both exporters and importers.
- Supply Chain Disruptions: Brexit has disrupted supply chains across multiple sectors, particularly in industries that rely on just-in-time delivery models. Delays at the border have impacted industries such as automotive, pharmaceuticals, and food, where time-sensitive deliveries are crucial.
- Regulatory Divergence: As the UK begins to diverge from EU regulations, businesses face the additional challenge of complying with two separate regulatory frameworks. This has created uncertainty for many companies, particularly those in highly regulated sectors like chemicals, agriculture, and food production.
The Paper’s Findings: A Detailed Snapshot
The Unbound paper highlights key statistics that underscore the scale of the trade decline. For instance, UK goods exports to the EU have fallen by approximately 15% compared to pre-Brexit levels. Meanwhile, imports from the EU have faced similar disruptions, with many European businesses choosing to focus on other markets due to the complexities of trading with the UK.
The paper also suggests that the decline may not be entirely temporary. While some of the disruption is attributable to initial teething problems, the long-term effects of Brexit on UK-EU trade could be more structural. Many businesses have either relocated part of their operations to EU countries or set up subsidiaries to avoid the barriers posed by Brexit. This has resulted in a permanent reconfiguration of trade relationships, with fewer goods flowing directly between the UK and EU.
How Are Businesses Adapting?
Despite the challenges, some businesses have adapted by investing in technology, logistics, and new processes to manage the complexities of post-Brexit trade. Customs clearance solutions, like CustomsPro from ChannelPorts, have become crucial tools in helping businesses navigate the new environment. Automated customs software reduces the burden of paperwork and helps businesses maintain compliance with both UK and EU regulations. As businesses adjust to the new landscape, tools that simplify the customs process and provide real-time updates will be essential for long-term success.
Opportunities Amid the Decline
While the figures paint a bleak picture, there are potential opportunities for businesses that adapt quickly. The UK’s independent trade policy offers the potential to strike new free trade agreements with non-EU countries, opening up alternative markets. Additionally, businesses that invest in technology and streamline their customs processes could find new efficiencies that allow them to remain competitive despite the increased barriers.
Moreover, the decline in EU trade has forced many businesses to diversify their customer base, with some finding new opportunities in emerging markets. This shift, while challenging, could lead to a more global trade outlook for UK businesses in the future.
Conclusion: Navigating a New Trade Era
The decline in trade between the UK and the EU since Brexit is undeniable. However, businesses that remain flexible and invest in the right tools and strategies can continue to thrive in this new landscape. As highlighted in Unbound: UK Trade post-Brexit, adapting to post-Brexit trade realities requires innovation, resilience, and a willingness to explore new opportunities outside the EU.
At ChannelPorts, we understand the challenges businesses face and are committed to providing the tools and expertise necessary to navigate these turbulent times. Whether through the use of digital customs clearance solutions like CustomsPro or through expert advisory services, we’re here to help businesses stay competitive and compliant in the post-Brexit world.