How Brexit disrupted UK trade with the EU

May 18 2023, by Dr Thomas Sampson

The RSE’s new Scotland-Europe Initiative launched on March 9 with a workshop on trade and investment chaired by the initiative’s lead Fellow, David Gow. The workshop, supported by the UK in a Changing Europe think tank, discussed the implications and impacts of the UK-EU Trade and Co-operation Agreement (TCA) two years after it took effect and Britain left the single market and customs union.

This is a highly contentious area. The independent Office for Budget Responsibility has pointed to a long-run 4% decline in UK productivity via the TCA, with both exports and imports down 15%. Some analysts suggest that, while global trade in goods rose 30% between 2019 and 2022, the UK recorded growth of 0% in exports and 19% in imports. Only a handful of pro-Brexit economists believe the impact has been minimal.

Here, Dr Sampson, Associate Professor in the Department of Economics at LSE and UKICE Fellow, who introduced the workshop, shows how outcomes so far have called into question economists’ assumptions that Brexit (voted for in 2016) would lead to a large fall in UK-EU trade – as steep as 30% – but have little effect on trade with the rest of the world. The post-TCA period shows a “major disruption” of UK-EU trade.

Together with colleagues, he estimates that “the implementation of the new trade relationship led to a sudden and persistent 25% fall in UK imports from the EU, relative to the rest of the world. In contrast, we find a smaller and only temporary decline in relative UK exports to the EU. Nevertheless, there was a sharp drop in the number of trade relationships between UK exporters and EU importers, which suggests that the introduction of the TCA caused many UK firms to stop exporting to the EU.”

Other discussants at the workshop – Professor Sarah Hall of Nottingham University, Professor David Bailey of Birmingham Business School and Dr Emma Congreve of the Fraser of Allander Institute – discussed the TCA effects on trade in manufacturing and financial services plus the Scottish economy. The contributions of Professor Hall and Dr Congreve can be viewed below:

Here are some slides from Dr Sampson’s presentation:

For further reading, please view this LSE blog where Dr Sampson (and colleagues) further explore the issues.