When the UK left the European Union (EU), it wasn’t just a political change. It led to a huge drop in trade, costing the country around $34 billion during the first two years of the EU-UK Trade and Cooperation Agreement (TCA). This new study, done by the London School of Economics (LSE), reveals how Brexit has hurt businesses, especially small ones.
Small Businesses Hit Hard
The biggest losers from Brexit were small and medium-sized businesses (SMEs). These companies, which had been exporting goods to the EU, faced many challenges under the new rules. Around 14% of UK businesses that used to sell to the EU completely stopped exporting after the new trade deal started in January 2021.
The report shows that total UK exports dropped by 6.4% in 2022 compared to what experts had expected before Brexit. Exports to the EU alone fell even more—by 13.2%. This sharp decline was due to new trade barriers like customs checks, paperwork, and regulations that made trading between the UK and the EU much harder.
Why Did This Happen?
The new rules brought on by Brexit created “non-tariff barriers.” These are things like extra paperwork, customs checks, and new rules that businesses had to follow. While big companies with more resources could handle these challenges, smaller businesses were less prepared and struggled to keep up.
For many smaller companies, these new requirements meant added costs and delays, making it too difficult to continue trading with the EU. Some of these businesses simply stopped exporting, unable to handle the complexity and cost of the new rules.
Imports Also Fell, But Not as Much
Imports from the EU also dropped, but not as dramatically. The UK imported 3.1% less from the EU, but some businesses found ways to get what they needed from outside the EU instead.
Looking to the Future
Despite the losses, the UK’s trade decline has been slightly less than what was originally predicted. The UK government had expected a 15% drop in trade, but the real decline has been around 6-7%. However, the long-term effects of Brexit are still uncertain, and many experts are worried about how it will impact the economy in the future.
The UK government is set to negotiate with the EU next year to update the TCA. These talks will try to fix some of the problems caused by Brexit, but it’s unclear if they will fully solve the issues businesses face.
Brexit’s Lasting Impact on Key Sectors
Brexit hasn’t just hurt trade; it’s also caused trouble for some of the UK’s most important industries. Sectors like automotive and agriculture have been particularly affected by new rules and regulations, which have made it harder to access markets and raised costs. In the long run, Brexit is expected to lower the UK’s GDP by about 0.6% each year.
As the UK continues to feel the effects of Brexit, businesses will have to adjust to these changes—some will thrive, while others might struggle to survive.
