Brexit disrupts UK- EU trade levels
UK trade with the EU has declined at twice the rate as trade with the rest of the world, according to a new report from trade credit insurer Atradius (www.atradius.co.uk).
In its economic research paper entitled Brexit disrupts UK-EU trade (https://atradius.co.uk/reports/economic-research-brexit-disrupts-uk-eu-trade-june-2021.html) Atradius reports that UK international trade collapsed 14.3% year-on-year in March 2021 with a near-equal contribution of EU and non-EU trade.
Exports performed the weakest, dropping 17.4% year-on-year compared to an 11.8% drop in imports. However, comparing trade levels from the past 12 months to those in 2018 shows the longer-term difference in trade levels is more protracted. Over this period, trade between the UK and non-EU countries fell 9.1% with UK-EU trade down 18.9%.
Atradius reports that while demand in the last year has been severely affected by the pandemic, the higher magnitude of long-term UK-EU trade contraction suggests Brexit uncertainty has played a significant role.
“UK trade is facing an unprecedented mix of challenges with the global health crisis and associated lockdowns causing demand at home and abroad to plummet. This came at a time of rising uncertainty surrounding the future trade relationship with the EU. The current iteration of the trade agreement has offered optimism for the 2021 outlook although there are still barriers to overcome in the form of customs bureaucracy and regulatory uncertainty. We can clearly see the impact of uncertainty on business confidence and resulting trade levels,” says James Burgess, Head of UK Commercial at Atradius.
“However, what is certain is that the global trade environment has changed – and will continue to do so. Businesses must future-proof their operations by proactively monitoring for new, ever-changing risks with an agile and robust response. Despite the ensuing uncertainty, opportunities for growth are arising across global markets. To seize these, businesses must equip themselves with a comprehensive trade strategy that protects them from the risks no matter what the future holds.”
The impact of uncertainty can be seen in the slowdown of growth during 2018 followed by a largely flat year in 2019. However, trade gains between the UK and EU made since 2016 were all but wiped out in 2020 in the run-up to the end of the transition period with uncertainly playing a larger role in reducing trade than the changing trade regime itself.
Non-EU imports now total 51.1% of the UK’s total imports following a decline of UK-EU imports of five percentage points since early 2018. During this time, UK-EU exports declined four percentage points to 45.6%.