UK exports have plummeted by £27 billion since Brexit, with smaller businesses shouldering the heaviest impact of the new trading barriers, according to a report by the Centre for Economic Performance (CEP) at the London School of Economics.
The analysis attributes the decline to Boris Johnson’s Brexit Trade and Cooperation Agreement (TCA), implemented at the start of 2021.
The report reveals that 16,400 small and medium-sized enterprises (SMEs)—14% of those previously exporting to the EU—have ceased trading with European markets due to the added complexities and costs.
Smaller Firms Suffer the Most
The study highlights that the TCA caused a 30% drop in the average value of EU exports for the smallest businesses (fewer than six employees) and a 15% decline for mid-sized firms (17–40 employees).
In contrast, larger firms, with over 107 employees, have been relatively unaffected, thanks to their ability to absorb fixed costs and prepare for the new trading environment.
“Most of the firms whose exporting business has suffered are smaller ones,” the report said.
“Importers and larger exporters adapted to the shock in ways that dampened the reduction in trade. Consequently, aggregate trade has, at least so far, been more resilient to Brexit than forecasters predicted.”
Labour Eyes a Reset
As the Labour government gears up to renegotiate aspects of the Brexit deal with the EU in the new year, Shadow Chancellor Rachel Reeves acknowledged earlier this month that the agreement had “reduced trade flows” between the UK and Europe.
Expert Insights
Kalina Manova, co-author of the CEP report, said, “The TCA has disrupted firms’ relationships with firms they export to and import from. Firms’ performance in the medium to long run will hinge on their ability to maintain supply networks and diversify export demand in the face of higher and uncertain non-tariff barriers to EU trade.”
Marco Forgione, Director General of the Chartered Institute of Export and International Trade, added, “This report reinforces the key points we have been raising with government since the TCA came into force.
“There has been a significant drop in SME’s trading with the EU, these businesses find the new requirements too complex, they’ve reacted to the many stories of problems with customs processes, and they don’t have the expertise or staff to cope with the extra rules and regulations now in place.”
He pointed to a recent example where a major chicken exporter lost over £80,000 due to minor errors in customs documentation, warning that EU suppliers may increasingly opt out of trading with UK firms.
