An Economic and Social Research Council paper in 2022 described Brexit as “an unprecedented unravelling of deep integration”. They studied trade changes since the 2016 referendum and found surprising results.
For 5 years, not too much changed in terms of the volume of EU-UK trade, or the number of trading relationships. Anticipation of a different affiliation was insufficient to halt trade, in the midst of uncertainty.
After decades of EU membership, many felt a new deal would be close to the old, Brexit would be watered down, or cancelled. Then the interim period ended, to be replaced by the Trade & Cooperation Agreement (TCA).
Falling Of A Cliff
Following the TCA, exports in both directions fell significantly. Through 2022 and 2023, EU to UK exports returned to almost 2019 levels, allowing for inflation.
UK exports to the EU remain down in real terms but recovered to a fair extent in terms of volume, The same does not apply to the number of trading relations, as charts from the research paper show:
An uptick just before the TCA can be put down to extra stocking up and changes in the Covid position. What is evident beyond this is the sudden and lasting 30% drop in the variety of trade, the volume of trading relationships.
In practice, this represents the large number of smaller businesses which have either reduced, or ceased exports. This applies in both directions to a degree, although export variety from the UK to the EU has reduced more.
That small business proved less able to cope with change and unwanted cost, or chose not to, is not a surprise. The timing was however unfortunate.
Whilst UK business is being encouraged to look at the wider world for trade opportunities, the UN and speakers at major economic conferences are warning that the era of globalisation risks going into reverse.
Shipping costs, geopolitics and protectionism are often quoted but whatever your view on the reasons, the outlook is well supported. Companies are saying they need supplies and production nearer to customers, along with higher nearby sales.
Our local market is of course Europe, which is no longer an open market. We have gone against a global trend, yet can to an extent reverse the process.
Building The Future
The ATA carnets we supply are a fair example of what can be achieved under international agreements. Of course there is a cost and a degree of admin but once in the EU, you are free to move around and your carnet can be used multiple times over a 12 month period.
This provides a user friendly route for temporary exports, from service visits, to performances, demos, or business exhibitions. A similar ethos could help to rebuild wider business and see this carried out in a rational way.
We are partly reliant on government to negotiate good solutions but can ourselves help to reverse the decline. Despite the political change, many in Europe still want to do business with us, we have been trading together for thousands of years.
If you run a smaller business and want any advice on how ATA carnets for the EU can help, please ask. For other forms of export, working with potential EU partners on practicalities and costs is worthwhile, they are part of our future.