UK exports to EU could fall another 8% as Finland, Luxembourg, Portugal and Greece take advantage of Brexit
Brexit could reduce UK exports to the EU by -7.73% by 2025, according to new analysis shared with AM City this morning.
That’s largely because smaller EU countries are profiting from Britain’s departure from the European Union, according to the report by broker City IG Group, which assessed export data to determine the impact of Brexit on international trade and to show areas of potential growth.
The three main countries that benefited from Brexit are Finland, Luxembourg and Portugal.
Other countries that have taken advantage of the vacuum left by the UK after Brexit include Ireland, Croatia, Greece, Lithuania and Cyprus. The highest proportional increases occur in places where the trade was initially smaller, the company found.
For example, in Finland, exports of aircraft, spacecraft and their parts exceeded estimates by 11,715.28%, at €102.71 million instead of the forecast €0.87 million. .
Meanwhile, the actual figures for exports from Luxembourg show an increase of 2017.99% compared to estimates, to 16.38 million euros instead of 0.77 million euros.
The company’s City analysts collected export data from the UK, EU countries and some other selected countries to identify trends arising from the impact of various factors that occurred in 2020.
The team assessed the UK’s main pre-Brexit exports, such as precious metals, vehicles and pharmaceuticals, alongside the main exporters of the same products in the EU and Singapore to understand which countries were able to increase their exports.
Chris Beauchamp, IG’s chief market analyst at City-based IG Group, said this morning that ‘the UK’s vote to leave the EU in 2016 represented a huge leap into the unknown and Covid has also created an additional layer of complexity for international and cross-border trade. investments. »
EU-UK trade: more red tape
Meanwhile, any UK business could “give up importing” due to tough new rules that came into force on January 1, a former senior Brexit planning official recently warned.
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 would cause “start-up problems” with some sectors hit harder. that others.
With the introduction of new trade barriers with the bloc, Rycroft said companies may decide it’s ‘just not worth it’
The changes mean 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 making full import customs declarations for up to 175 days, a measure which was introduced to deal with the disruption of Brexit.
Separate arrangements are in place for trade with the island of Ireland.
Rycroft told BBC Radio 4’s PM program that the new rules could be too burdensome for some businesses.
“The Federation of Small Businesses estimates that only about a quarter of its members are ready for this, which is a little surprising in a way because they had obviously been given a lot of warning that this was coming,” he said. .
“Let’s not forget that they’ve had a pretty torrid year, most companies, with Covid and everything, so a lot of companies won’t be ready.”
“There will be start-up issues…but the big question is how many companies ultimately think, ‘Do you know what? It’s just too complicated and give up the import? Just as some companies have already given up exporting because it’s not worth it.
He added: “Companies exporting to the EU from the UK have already faced these rules, obviously, for a good part of the year. So now it will be British companies that import from the EU (who) will have to deal with this new Brexit bureaucracy.
Rules on country of origin documents have also become slightly stricter, with declarations having to be made when goods arrive here.
Rycroft said it will be “really messy” for some products that “have a lot of different bits or ingredients in them.”
Asked if the country is likely to see rising prices or empty shelves, he replied: “I wouldn’t over-dramatize. I think that at the margin there are new costs, which will ultimately have to be borne by consumers.
“So HMRC estimate that the total cost of these new systems will be in the region of £13billion a year – that’s a lot of money by any measure spread over a large population like the UK , of course, these are modest cost increases throughout the supply chain.
“But at the margin there will also be companies, as I said before, (who) will be thinking, ‘Do you know what? It’s not worth it. So there will be at the margin a reduction in choice as well .
“That is why the Office (for) Budget Responsibility estimates that the net impact of this agreement on our wealth as a country will be to reduce it by around 4% in the medium term. This is because trade between the UK and the EU will be much 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 Department of Foreign Affairs.