Impact of Brexit agreement on trade revealed

Many small businesses in the United Kingdom have abandoned trading with Europe altogether in the first year since the signing of the British government's post-Brexit trade deal with the European Union, new figures have revealed.

A study by the London School of Economics' Centre for Economic Performance found the UK's imports from the 27-member bloc have fallen by 25 percent, compared with its imports from other parts of the world.

Although exports to the EU were not as badly affected, it was smaller businesses that were feeling the biggest impact, with the increased cost and complication of trying to export cited as significant factors.

The study has been described as the most comprehensive analysis yet carried out into how trade has been impacted since the 2016 referendum decision for the UK to leave the EU.

It showed that during the negotiation and transition period that lasted until the end of 2020, when an agreement was finally reached, trade had remained relatively stable, despite uncertainty about how exactly the long-term trade relationship between the two sides would look.

Since the introduction of the UK-EU Trade and Cooperation Agreement, or TCA, at the start of 2021, however, things had changed significantly.

"The number of export relationships with the EU fell sharply in 2021," said the report's co-author Rebecca Freeman.

"Although it is surprising that imports were hit harder than exports during the first year of the TCA, it would be a mistake to conclude that exporters were unaffected," the study, which looked at trade patterns across 1,200 different products, noted, also observing that "lower value relationships", meaning smaller traders, were the most affected.

Thomas Sampson, an associate professor of economics at the LSE, who contributed to the report, told the Financial Times that the toll it had taken on smaller businesses was a particular cause for concern with regard to the longer term.

"There's quite a lot of evidence that future growth in trade comes from firms that are small today," he explained. "If you kill off those exporting relationships it may lead to lower future export growth.

"The TCA has increased trade costs, leading to a fall in imports from the EU and reducing the number of products exported to the EU by UK traders … these changes make the UK a harder place to do business," he added.

William Bain, head of trade policy at the British Chambers of Commerce, said that the study's findings had just confirmed what business leaders had warned about before the TCA was reached, because of its details making life so much more complicated for the sector.

"Inevitably, it is smaller firms which don't have the money, time or logistical capacity to set up within the EU which are being hardest hit," he said.