Smaller EU countries are benefitting from Britain’s departure from the European Union.
This is largely because they fill up the Brexit exporters’ spots. In fact, this situation could reduce the UK’s exports to the EU by -7.73 per cent by 2025, according to new analysis shared with City A.M. this week.
The top three countries that benefitted from Brexit were Finland, Luxembourg, and Portugal, according to the report by City broker IG Group, which evaluated export data to determine the impact of Brexit on international trade and to show areas of potential growth.
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, Luxembourg’s actual figures for exports show an increase of 2017.99 per cent above estimates, at €16.38m instead of €0.77m.
The firm’s 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 UK’s 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, IG’s chief market analyst at 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 also created an additional layer of complexity to international trade and cross border investments.”
EU to UK trade: more red tape
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 4’s 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 they’d obviously had a lot of notice that this is coming,” he said.
“Let’s not forget, they’ve had a pretty torrid year, most businesses, with Covid and everything else, so a lot of businesses won’t be ready.”Philip Rycroft
“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 it’s 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 it’s 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 wouldn’t 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 – that’s a lot of money by any token spread across a big population like the UK, of course, that’s modest increases in costs through the supply chain.
“But at the margins also there’ll be some businesses, as I said previously, (who) think: ‘Do you know what? This isn’t 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. That’s 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.
UK business owners
In addition to the export data, nearly one in three fear their company will close before the end of this year, primarily as the long-term effects of Brexit start to bite, according to alarming data shared with City A.M. this week.
A slightly bigger number, 37 per cent, don’t think their business will survive until the end of 2027, as more than half (54 per cent) of UK business owners indicated they found 2021 to be a more challenging year for their business than 2020.
Brexit was and continues to be a real obstacle, the entrepreneurs said, with 73 per cent of those taking part in a countrywide-survey by One World Express saying their business has seen zero benefit from the UK’s departure from the EU.
As the overwhelming majority (73 per cent) of business leaders said their organisation has seen no benefits from Brexit, a quarter made a conscious decision to move away from importing or exporting to or from the EU in 2021.
Moreover, the data showed that half of business leaders consider the potential emergence of new Covid variants to be the greatest threat to their businesses in 2022.
“Brexit was always going to present challenges to UK businesses, but these have been compounded by the pandemic,” explained Atul Bhakta, CEO of One World Express, this morning.
“This double threat has resulted in staff shortages and supply chain problems, with Brexit adding new red tape on top of this.”
“With further uncertainty created by the Omicron variant, it is little wonder that so many business leaders are concerned about the survival of their organisation,” Bhakta concluded.