The UK’s trade with the EU has fallen sharply since the end of the Brexit transition period, according to new figures released by the Office for Budget Responsibility to coincide with the Budget. Britain’s imports from Europe fell by 24 per cent between December 2020 and March 2021, while exports to the continent fell by 23 per cent.
Source: Office for Budget Responsibility
Though the UK formally left the EU in January 2020, change to the two economies’ trading rules have only started coming into force since the end of the Brexit transition period in January 2021.
A steep contraction in EU trade also followed Britain’s formal exit from the EU in 2020, but this coincided with a worldwide slump in trade resulting from the Covid-19 pandemic. This time, however, the UK’s exports to the rest of the world have remained largely stable, while imports have risen.
Despite some signs of a recovery, Britain’s exports to the EU remain 8 per cent below their December 2020 levels, while imports remain down by more than 15 per cent.
Since 2016, the Office for Budget Responsibility has predicted that Brexit would lead to a long-term 14 per cent reduction in both exports to and imports from the EU, leading to a 4 per cent reduction in the UK’s productivity (twice as large as the forecast long-term damage from Covid-19).
The Centre for European Reform estimated that, based on recent trends for other countries, Brexit had reduced the UK’s goods trade by 13.5 per cent between January and May 2021.