Brexit not to blame for UK trade dip, study suggests

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The post-pandemic downturn in British exports to the EU cannot be blamed on Brexit, a report has suggested.

The Centre for Brexit Policy said it was a “myth” that Britain’s departure from the bloc was mostly to blame for the shortfall in exports, pointing instead to a “combination of global factors” and the “distinctive pattern of UK exports”.

A report from the think-tank looked at why UK exports have recovered more slowly than other G7 countries since the Covid-19 pandemic.

It said that because of the distorting effects of the pandemic and the impact of Russia’s invasion of Ukraine it is difficult to ascertain the “underlying drivers”.

But the report claimed that more than 80 per cent of the UK’s current shortfall in exports is in sectors that “cannot in any meaningful way be ascribed” to Brexit.

Heavy reliance on cars

It said a heavy reliance on overseas sales of cars and aircraft components along with cutbacks in North Sea oil and gas production are the main reasons for the underperformance against international competitors.

Phil Radford, a trade analyst who wrote the report, said: “The UK’s particular mix of exports explains why UK trade was bound to underperform G7 countries in 2021 and 2022.

“The motor vehicle and aerospace sectors are easily our biggest goods-export industries in global terms. In 2019, for example, they delivered more than 20 per cent of all UK goods exports.”

The report argued the two sectors were hard hit by recent global events, including the pandemic and the subsequent temporary collapse of civilian aviation, along with a global shortage in microchips.

It said that the shape of Britain’s goods export industries meant it had a “unique misfortune among G7 countries”.

It conceded that Brexit was a factor in reduced food product exports to the EU.

‘A trivial effect’

However, it claimed that, overall, Brexit has had a “trivial” effect on UK-EU trade and is dwarfed by other developments such as the impact of higher corporation taxes on the pharmaceutical industry, EU subsidies to its car makers and green policies making the UK an importer of energy.

The report said that about 17 per cent of the falls in goods exports to the EU in 2022 might be directly attributed to Brexit.

Mr Radford said: “The UK-EU deficits in these three sectors are the result of policy choices by UK governments, and not shifts in global competitive advantage.

“Their impact on UK trade is multiple times worse than the impacts of Brexit on UK’s food, agriculture, jewellery and other sectors. And yet the challenges faced by the UK’s auto and pharma sectors in particular receive next-to-zero attention from British trade commentators.”

A report by the Office for the Budget Responsibility in March said that “weak growth in imports and exports” partly reflected the “continuing impact of Brexit”, which the forecaster expected to “reduce the overall trade intensity of the UK economy by 15 per cent in the long term”.

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