Trade with EU increases but remains below pre-Brexit levels

Bounceback from January’s collapse in exports may have stalled, expert warns

Compared to the first quarter of 2019, exports to the EU fell by more than a quarter (REUTERS)

The scale of damage to UK trade with the EU inflicted by Brexit has been laid bare in official figures which showed goods exports to the bloc in the first quarter of 2021 down by 18 per cent compared to the last three months of 2020.

Trade with the EU continued to recover from the precipitous collapse in January – when UK exports fell by 42 per cent – with sales to the continent in March up 8.6 per cent (£1bn) and imports up 4.5 per cent (£800m) compared to February.

But Thomas Sampson of the London School of Economics said that today’s figures suggest that the “incomplete bounceback” seen in February has now stalled, leaving trade flows below the pre-Brexit norm, with no certainty that they will eventually reach the levels that would have been expected without EU withdrawal.

Exports to the rest of the world increased by 0.4 per cent over the first quarter, suggesting that the decline in sales to the EU was not due solely to the coronavirus pandemic, he said.

And in a sign of the shift in commercial links away from the UK’s former European partners, imports of goods from the rest of the world in the first quarter of 2021 were higher than EU imports for the first time since the Office for National Statistics began collecting data in 1997.

Compared to the first quarter of 2019, exports to the EU fell by more than a quarter (29 per cent) from £45bn two years ago to £32bn in the first three months of this year – though trade in early 2019 was distorted by stockpiling ahead of the then expected date of EU withdrawal on 29 March.

First quarter exports to the rest of the world fell over the same period by a much smaller 7 per cent, from £44.5bn in the first quarter of 2019 to £41bn in the first three months of 2021, again suggesting that the decline in exports to the EU is linked to Brexit.

Dr Sampson, the LSE’s associate professor in economics and the author of studies of the impact of EU withdrawal on trade, told The Independent: “The March figures are still lower than one would have expected pre-Brexit, as you can see by comparing what happened to trade with the EU and trade with non-EU countries since January.

“There was a dramatic collapse in January and an incomplete bounceback in February and things have levelled off a bit in March. If trade were on a path to normal, I would have expected further evidence of a bounceback in March, with EU trade growing faster than non-EU, but we didn’t see that.

“What that suggests to me is that the bounceback stalled in March at a level that is lower than the pre-Brexit normal. If this is indicative of what the new longer-run level is likely to look like, then we have seen a decline from Brexit.”

Boris Johnson’s official spokesperson said: “The statistics show a welcome increase and continued recovery in the value of trade between the UK and EU in March from February 2021, with exports almost returning to December 2020 levels and indeed now exceeding the average levels across 2020.”

But Liberal Democrat Treasury spokesperson Christine Jardine said: “There is no way of sugar-coating the clear damage to the economy that these figures demonstrate.

“The combination of Covid and the difficulty businesses face in dealing with the new EU trade deal have created a perfect storm for the economy.

“This demonstrates again the need for the extension and reform of business support to avoid a damaging cliff edge in September. It’s not good enough for the chancellor to claim he has built business confidence – we need to see real actions, such as the extension of the furlough scheme and a National Insurance contribution cut for small businesses.”