UK-EU trade slumps as Brexit takes toll
By Sean Farrell
Date: Friday 12 Mar 2021
(Sharecast News) - The UK's exports to the EU plunged more than 40% in January as Brexit took its toll on Britain's trade with its European neighbours, official figures showed.
Britain's exports to the EU fell by £5.6bn, or 40.7%, causing a 19.3% drop in total exports, the Office for National Statistics said. Imports from the EU fell by £6.6bn or 28.8%.
The biggest declines in imports were for machinery, transport equipment and chemicals, particularly cars and medicines.
Taken together the decline in trade with the EU was the biggest monthly decline since records began in January 1997, the ONS said. The figures were the first to be released after the end of the Brexit transition period which finished on 31 December.
The ONS said trade had not been typical in recent months and urged caution in reading too much into one month's figures. Stockpiling in late 2020 and disruption in the immediate aftermath of the Brexit deadline could have contributed to January's decline, it said.
Covid-19 restrictions could also have played a part in reducing trade. After a slow start, trade between the UK and the EU appeared to pick up towards the end of January, the ONS said.
Nevertheless many UK businesses have reported increased costs and red tape when trading with the EU and some have given up. The figures were released with relations between the UK and the EU fractious over matters such as Northern Ireland and Covid-19 vaccines.
Allie Renison, a policy adviser to the Institute of Directors, said: "Even taking account the December start to lockdown and stockpiling increase in the months leading up to January and Brexit proper, these figures are horrendous.
"The challenge now is for government to take steps in areas it can control to ensure this drop in trade with the EU does not become permanent, and negatively affect the UK's wider export capabilities in the longer term."
The surprising trade slump was reported as the ONS UK said economic output fell by 2.9% in January, less than expected during the third Covid-19 lockdown.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said Brexit made a bad situation worse but that it was not possible to untangle the web of factors involved in the drop in trade.
"Our view remains that Brexit is best seen as a slow puncture, rather than a sudden blowout, with the costs gradually accumulating in the form of lower investment and immigration than otherwise would have been the case," Tombs said.
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