The value of UK exports to the European Union plummeted by £5.6bn after the Brexit transition period ended, in the sharpest drop since records began.
Total exports of goods fell by £5.3bn, or 19.3 per cent, from December 2020 to January 2021. The fall was mainly driven by a 40.7 per cent drop in exports to the EU.
According to data from the Office for National Statistics, published this morning, imports of goods fell by £8.9bn in the first month of the year, driven by a £6.6bn, or 28.8 per cent, decline in EU imports to the UK.
The drop recorded in both imports and exports were the largest monthly falls since records began in January 1997.
End of transition period
It comes after the EU exit transition period ended on 31 December, and was also impacted by the third national coronavirus lockdown that began at the beginning of January.
The ONS said the fall could also be attributed to increasing imports and exports in November and December last year, as businesses stockpiled in preparation for Brexit.
However analysts at Goldman Sachs cautioned about attributing too much of the trade collapse solely to the change of trade terms that came into effect on 1 January.
Analysts at the investment bank said “while suggestive of a potential Brexit drag, it is important to caution against reading too much into these data”.
Aside from stockpiling efforts in the months ahead of Brexit and what the ONS called “erratic” data from just one month, Covid disruption had a lot to answer for.
“Global supply chain issues have caused delays in ports across many countries, so it is likely that some of January’s softness in UK trade is not Brexit-related. Covid also impacted UK trade around year-end, with temporary EU border controls, the introduction of mandatory testing for lorry drivers, and the start of the UK’s third national lockdown,” Goldman Sachs’ Steffan Ball said in the note.
ONS statistics also showed this morning that monthly services fell 3.5 per cent in January, meaning it was 10.2 per cent below its February 2020 levels, as the latest lockdown was implemented.
The largest contributor to the fall in services output was wholesale and retail trade, offset partially by growth in health.
Separate data published today showed that monthly UK production fell 1.5 per cent in January, meaning it was five per cent below its February 2020 levels – the last month of normal trading before the pandemic.
The decline was driven by falls of 2.3 per cent in manufacturing and 0.7 per cent in mining and quarrying, which were partially offset by a rise of 0.9 per cent in electricity and gas and 1.2 per cent in water supply and sewage.