What impact are Brexit rules having on EU-UK trade?

Businesses have had to get to grips with many changes to trade with the EU in the post-Brexit era and a new study has suggested that new rules introduced last year have caused a “major shock” to UK-EU trade.

According to the latest LSE Centre for Economic Performance study, imports from the EU to the UK fell by a quarter relative to those from elsewhere in 2021.

The LSE analysed trade patterns of around 1,200 products between the UK and the continent and also found that there had been a “sharp drop” in the number of relationships between UK exporters and EU importers.

The researchers have said that the findings are surprising given the fact that the UK has delayed the introduction of many customs checks on EU goods until this year.

Exports to the EU are recovering, but the study team said that much of this was down to an increase in sales of costly machinery.

When looking at the wider variety of goods sold to the EU, this was in decline by up to 30 per cent, with research suggesting that the administration of the new rules made it less attractive for smaller businesses to sell low-value items in European markets.

Thomas Prayer of the LSE said: “It appears the UK simply stopped selling a lot of products to smaller countries in the EU.”

What new challenges has Brexit created?

Having reviewed the various factors behind the decline in trade, the LSE researchers pointed at three primary factors limiting trade:

  • Additional red tape
  • New customs controls
  • Taxes and tariffs hitting European businesses hard.

Could things get worse for EU-UK trade?

At the moment full border checks have still not been implemented and these remain delayed until July at the moment.

There are already rumours growing that this final set of border checks may be delayed further in the months ahead to support trade and prevent a sudden surge of additional costs and administration.

However, given the main trade barriers appear to be the controls and costs and work involved in checks and red tape there are clear fears about the volume of exports between the UK and EU in future.

Nevertheless, the EU remains a close trading partner with the UK and many opportunities still exist for businesses to enter new markets on the continent with the right support and advice.

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