Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The UK goods trade has suffered its steepest five-year fall on record, highlighting how Brexit has reduced flows both into and out of Britain, say economists.
The volume of UK goods imports and exports was 7.4 per cent smaller in 2023 than in 2018, the largest five-year decline in goods trade since comparable records began in 1997, according to FT calculations of data published by the Office for National Statistics on Friday.
The ONS reported that the volume of imports fell 7.4 per cent compared with 2022 and was down 3.8 per cent compared with 2018.
Meanwhile, exports fell 4.6 per cent year on year, with substantial drops in exports to both EU and non-EU countries. Over five years, export volumes fell 12.4 per cent.
Emily Fry, economist at the Resolution Foundation think-tank, said after years of data being affected by the pandemic and the energy price shock, the 2023 figures were a real “big sign” of the impact of Brexit.
“A clear implication of this [data] is that the new trade barriers that were put in place by Brexit are having an effect on trade,” she said.
Economists point out that the performance of the UK goods trade has been worse than that of other advanced countries.
“The UK’s weak trade performance is unusual among advanced economies,” said John Springford, deputy director of the Centre for European Reform think-tank.
He added that most countries saw an increase in goods trade after the pandemic, but “the UK did not participate in the boom thanks to the trade barriers that it imposed upon itself”.
“The obvious culprit is Brexit,” he said.
In its latest economic and fiscal outlook, the Office for Budget Responsibility, the spending watchdog, noted in 2023, UK trade intensity — exports and imports as share of the economy — was 1.7 per cent below its 2019 level, driven by poor goods performance. This contrasted with an average increase of 1.9 per cent across other G7 economies.
“This may suggest that Brexit frictions and post-pandemic disruptions have weighed more on trade in goods than on services,” the OBR concluded.
Jonathan Portes, professor of economics and public policy at King’s College London, said that while UK goods exports have performed “poorly” over recent years compared to other economies, Britain’s services exports have “grown strongly”.
But he added that it was “unclear how much of the underperformance in goods trade related to Brexit”. “Goods exports have been weak for both EU and non-EU countries — although Brexit is almost certainly partly responsible,” he said.
Springford said the weakness of UK trade with both EU and non-EU countries may have been because Britain had missed out on the strong growth of intra-EU trade in recent years. “We can infer that the UK’s goods exports to the EU would have grown more than its exports to the rest of the world if Brexit hadn’t happened,” he said.
Fry said it was “particularly concerning” to see exports of key high-value manufacturing sectors shrink after the ONS data showed the real value of chemical exports had dropped 15 per cent compared with 2018.
The data “implies that those industries aren’t performing particularly well after Brexit and that could have kind of longer term implications for poor national productivity”, she added.
Source: Economy - ft.com
