UK exports to EU may drop by another 8 per cent as Finland, Luxembourg, Portugal and Greece benefit from Brexit – City A.M.

Monday 17 January 2022 12:18 pm

Brexit could reduce the UKs exports to the EU by -7.73 per cent by 2025, according to new analysis shared with City A.M. this morning.

This is largely because smaller EU countries are benefitting from Britains departure from the European Union, according to the report by City broker IG Group, which evaluated export data to determine theimpact of Brexit on international trade and to show areas of potential growth.

The top three countries that benefitted from Brexit were Finland, Luxembourg, and Portugal.

Other countries that benefited from the vacuum left by the UK after Brexit included Ireland, Croatia, Greece, Lithuania, and Cyprus. The highest proportional increases occur in locations where trade was smaller to begin with, the firm found.

For example, in Finland, exports of aircraft, spacecraft and parts thereof beat estimates by 11,715.28 per cent, at 102.71m instead of its predicted 0.87m.

Meanwhile, Luxembourgs actual figures for exports show an increase of 2017.99 per cent above estimates, at 16.38m instead of 0.77m.

The firms City analysts gathered export data from the UK, countries from the EU, and some additional selected countries, to identify trends stemming from the impact of various factors that occurred during 2020.

The team evaluated the UKs main exports prior to Brexit, such as precious metals, vehicles, and pharmaceutical products, alongside the top exporters of the same products in the EU and Singapore to understand which countries were able to increase exports.

City-based Chris Beauchamp, IGs chief market analyst at IG Group, said this morning that the UKs vote to leave the EU in 2016 represented a huge leap into the unknown and Covid also created an additional layer of complexity to international trade and cross border investments.

Meanwhile, any British businesses may give up importing as a result of new strict rules that came into force on 1 January, a former senior civil servant in charge of Brexit planning warned recently.

Philip Rycroft, who was permanent secretary at the Department for Exiting the European Union (DExEU) between 2017 and 2019, said the changes that came into play on January 1 will cause teething problems, with some sectors hit harder than others.

With the introduction of new barriers to trade with the bloc, Rycroft said businesses may decide it is simply not worth the hassle

The changes mean that importers must make a full customs declaration on goods entering the UK from the EU or other countries. Traders are no longer able to delay completing full import customs declarations for up to 175 days, a measure that was introduced to cope with the disruption of Brexit.

There are separate provisions in place for trade with the island of Ireland.

Rycroft told BBC Radio 4s PM programme the new rules might be too much for some companies.

The Federation of Small Businesses reckon that only about a quarter of their members are ready for this, which is a bit surprising in a way because theyd obviously had a lot of notice that this is coming, he said.

Lets not forget, theyve had a pretty torrid year, most businesses, with Covid and everything else, so a lot of businesses wont be ready.

There will be teething problems but the big question is, how many businesses ultimately think: Do you know what? This is just too much hassle, and give up importing? Just as some businesses have already given up exporting because its not worth it.

He added: Businesses exporting to the EU from the UK have already faced these rules, obviously, for the best part of a year. So its now going to be those businesses in the UK that import from the EU (that) have got to deal with this, essentially, new Brexit bureaucracy.

Rules on country of origin documents have also become marginally stricter, with declarations needing to be made when goods arrive here.

Rycroft said this will be really complicated for certain products that contain lots of different bits or ingredients.

Asked if the country is likely to see rising prices or empty shelves, he said: I wouldnt overdramatise it. I think at the margins there are new costs, which will ultimately have to be borne by the consumers.

So HMRC reckon that the total cost of these new systems will be something like 13bn a year thats a lot of money by any token spread across a big population like the UK, of course, thats modest increases in costs through the supply chain.

But at the margins also therell be some businesses, as I said previously, (who) think: Do you know what? This isnt worth the hassle. So there will at the margins be a reduction in choice as well.

This is why the Office (for) Budget Responsibility reckons that the net impact of this deal on our wealth as a country will be to reduce it by about 4% in the medium term. Thats because trade between the UK and the EU will be a lot less free than it was when we were in the single market.

The DExEU closed in January 2020, with Brexit negotiations now handled by the Foreign Office.

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UK exports to EU may drop by another 8 per cent as Finland, Luxembourg, Portugal and Greece benefit from Brexit - City A.M.