Two years of Brexit cost UK $34 billion in trade – study

A report by the LSE has laid bare the financial impact of Britain leaving the EU

Britain’s departure from the European Union cost the country approximately $34 billion in lost trade during the first two years under the EU-UK Trade and Cooperation Agreement (TCA), according to a new study by the Center for Economic Performance (CEP) at the London School of Economics.

The report highlighted that small and medium-sized enterprises (SMEs) bore the brunt of the impact. Around 14% of UK firms that had previously exported to the EU stopped trading with the bloc altogether after the agreement came into effect in January 2021. 

The research data gathered from over 100,000 firms revealed that total goods exports from the UK fell by 6.4% in 2022 compared to pre-Brexit expectations. Exports to the EU saw a sharper decline, falling by 13.2% due to trade barriers introduced by the TCA. 

The study also pointed out that non-tariff barriers, including customs checks, paperwork, and regulatory compliance requirements, have created significant hurdles for businesses. While larger firms have adapted to these changes, smaller businesses have struggled due to limited resources and expertise.

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Imports from the EU also fell, though less dramatically, declining by 3.1%. Many UK importers have offset losses by sourcing materials from outside the bloc.

Thomas Sampson, a co-author of the study, noted that while the total reduction in trade has so far been less severe than the 15% forecast by the Office for Budget Responsibility, the long-term impact remains uncertain. 

The findings come as the UK government prepares for negotiations with the EU next year to update the TCA. The agreement is a post-Brexit trade deal signed in December 2020, outlining the rules for trade, security, and cooperation following London’s departure from the single market and customs union.

Brexit has disrupted trade between the UK and EU, leading to increased costs for businesses and projected long-term GDP losses averaging around 0.6% for the 27 EU member states. Key sectors like the automotive industry and agriculture have faced significant challenges due to regulatory changes and reduced access to UK markets.