United Kingdom: Foreign trade declines due to Brexit
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The United Kingdom’s exit from the European single market and the customs union on 31 January 2020 caused a significant economic shock which has had an adverse impact on growth and inflation in the UK, particularly on foreign trade.
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Since 1st January 2021 and the coming into effect of the post-Brexit Trade and Cooperation Agreement (TCA), bilateral trade in goods between the United Kingdom and the European Union has fallen sharply.
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The United Kingdom has made changes which mean that some of its imported goods now come from countries outside the European Union.
Brexit is an unprecedented event, with the UK leaving such a major and important area of deep economic integration as the European single market. This break-up is having very significant effects on the UK economy at multiple levels.
Firstly, the significant uncertainties that were in evidence throughout the negotiations on the exit from the EU have weighed on corporate investment and, as a consequence, on economic growth. According to a study carried out by the think tank Centre for European Reform (2022), UK GDP in Q4 2021 was 5.2% lower than it would have been had Brexit not happened.
This lower growth can be explained in part by a drop in productivity, as a result of Brexit, in the region of 2 to 5% between 2016 and 20192. Among other things, companies will have spent a significant amount of time planning ahead and reorganising their activities with a view to leaving the EU, to the detriment of the rest of their business activities.
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