Brexit's huge impact on UK exports hits small businesses

That said, many Brexit supporters have shown a distinct lack of willingness to acknowledge the consequences of their folly.

The consequences are obviously enormous. And the enormous drag of Brexit on the British economy is clear from the CEP's analysis.

Thomas Sampson, co-author and associate professor of economics at LSE, calls the situation a disaster for small exporters.

Learn more

This is a demoralizing situation, particularly considering that the new Labor government, which is seeking to improve the Trade and Cooperation Agreement (TCA) between the United Kingdom and the European Union after the Brexit, but unfortunately only modest, has adopted the key elements. Conservative hard Brexit.

Specifically, Labor has made clear that it will continue to deprive UK exporters and importers of the enormous benefits of frictionless trade.

He also stressed that he would not boost the UK's economic growth potential by seeking to restore the free movement of people between the UK and the European Economic Area, nor would it allow hugely beneficial immigration which would bring to a country facing significant skills and labor shortages and a major demographic challenge.

Prime Minister Sir Keir's administration has turned its back on these huge benefits the UK enjoyed before Brexit, refusing to join the EU, the single market or even the customs union.

It's truly lamentable.

What the new CEP research tells us is that the TCA reduced the UK's total merchandise exports by around 27 billion, or 6.4%, in 2022. This was due to a drop of 13 .2% of the value of goods exported to the EU. .

These are big numbers.

CEP's analysis uses data from more than 100,000 companies to estimate the gap between the actual value of exports under the TCA and what would have been expected if the UK had remained in the EU. Data from 2012 to 2022 is used in the research.

CEP research explores the impact of Brexit on trade using customs records collected by HM Revenue & Customs.

The study reveals that 14% of companies – or around 16,400 – that previously exported to the EU stopped doing so after the TCA came into force in January 2021.

That's a huge proportion.

And CEP research shows that it is small businesses that have suffered the most, with only a fifth of larger businesses unaffected overall by the move to the TCA agreements.

Small businesses obviously have enough challenges to overcome without the UK government putting a monumental obstacle in their way, forcing them to stop exporting to the EU or reduce their sales to the huge bloc with a hard, senseless Brexit.

The CEP notes: Most companies whose export activities suffered were smaller.

To assess the effect by company size, the report's authors divided the companies in their sample into five groups based on the number of employees.

The CEP observes: They find a negative impact of the TCA on exports for all companies, except for the fifth of the largest companies. Among companies that continued to export to the EU, the TCA reduced the average value of EU exports by 30% for the fifth of the smallest companies, with six or fewer employees, and by 15% for the fifth intermediate, between 17 and 40 employees.

Learn more

In contrast, the exports of the fifth largest companies, those with more than 107 employees, were not affected by the TCA. The success of large companies in maintaining their export levels has mitigated the decline in overall trade.

The researchers found no evidence that the TCA had a positive or negative effect on companies' exports to countries outside the EU.

The CEP notes: This means that the 6.4% reduction in overall exports is entirely due to the decline in exports to the EU.

Mr Sampson said: “The ATT was a disaster for small exporters, many of whom simply stopped exporting to the EU.

He noted that large companies have adapted well to the new trade barriers.

The study shows that neither the UK's technical Brexit on January 31, 2020, nor concerns over the country's exit from the single market at the end of this year have affected exports to the EU.

The damage came with the loss of frictionless trade following the UK's exit from the single market, when the CCA negotiated by Boris Johnson's administration came into force.

This contrasts with the situation of net immigration to the UK from the EU. Citizens from bloc countries were understandably much less inclined to come to the UK following the Brexit vote in 2016, not only because of the nightmarish bureaucracy and limitations it would introduce, but also the hostile message sent by the result of the referendum.

Thomas Prayer, co-author and associate of the CEP trade programme, said: “After the referendum, there was virtually no change in business trade with the EU until the referendum came into force. TCA. It is the introduction of new trade barriers under the ATT, rather than the uncertainty of the withdrawal process, that has reduced business trade with the EU.

The CEP notes that the TCA does not include tariffs.

However, the CEP's list of non-tariff barriers, erected following the UK's exit from the single market on terms agreed by Mr Johnson's administration, highlights the scale of the challenges for exporters.

The CEP states: The TCA did not include tariffs. But it has introduced barriers to trade such as customs controls and red tape, rules of origin requirements, excise duties, sanitary and phytosanitary controls on the movement of animals and plants, and the need for exporters to demonstrate that their products comply with the regulations of their destination market. .

These are barriers that British exporters now experience miserably. And it's no surprise that so many businesses have rallied to export to the EU as the UK's hard Brexit has taken its toll.

The Labor government should think about all this.