The UK's global share of goods exports has fallen by around £74
billion in the five years since 2019, with around half of that
loss taking place in key sectors identified in the Government's
industrial strategy like cars and pharmaceuticals, according to
major new Resolution Foundation research published today
(Monday).
Ten years on from the EU referendum, the report Leaving EU
behind? examines what lies behind the UK's poor recent
record on trade, and how it can avoid a similarly bad performance
over the next decade.
The report notes in the years since the UK formally left the EU
with the Trade and Corporation Agreement, the UK's transition
towards a services-dominated economy has accelerated three times
as fast as it did in the years before Brexit. Services now
account for 59 per cent of all exports up 11 percentage points
since 2019.
However, this is not due to a boom in services where UK exports
have grown roughly in line with the G7 but instead a
deterioration across goods exports. The UK's share of
global goods exports fell by around a fifth between 2019 and 2024
a shortfall of roughly £74 billion.
The scale of the UK's deterioration compared to other advanced
economies is uniquely bad, say the authors, and has been driven
by Brexit rather than other recent economic shocks like high
energy prices and China's export push. Other countries that have
faced these latter shocks have not seen the kind of exports
downturn that Britain has experienced.
Worryingly, the report notes that almost half (49 per cent) of
the UK's recent poor performance in goods exports have taken
place across the eight key sectors identified as priorities in
the Government's industrial strategy. The losses of export
competitiveness in sectors like cars and pharmaceuticals is
especially worrying given the UK's historic strengths in these
areas.
The scale of the slow puncture' Brexit has delivered to Britain's
exports means that the Government should revamp its industrial
strategy and ensure that the UK's export performance in key
sectors over the next ten years is far better than it has been
over the past ten.
The report says Britain needs to sharpen its trade game by
leveraging the strengths of its powerhouse services exports while
doing more to rescue a smaller number of goods sectors.
At present, the eight sectors in the current industrial strategy
account for two-thirds of all goods trade, highlighting a failure
to prioritise. Instead, the Government should focus on a small
number of critical, high-value sectors like aero-engineering,
pharmaceuticals and medicines where the UK still has a
competitive advantage.
The Government should also look at where and why the UK's export
position has weakened since Brexit notably in sectors where
investment is footloose and where production runs through complex
global supply chains and use its trade strategy to address these
barriers. For sectors like chemicals and cars this should mean
far deeper dynamic alignment with the EU to smooth supply chains
and stop UK manufacturers from being frozen out of them.
Finally, if closer alignment to protect these sectors requires a
breach of the Government's red lines' over Brexit, Ministers
should be clear with the public about the economic cost of these
red lines', and whether they are worth the loss of
competitiveness and jobs that they are causing.
Sophie Hale, Research Director at the Resolution
Foundation, said:
The tenth anniversary of the EU referendum offers a timely
opportunity to assess Britain's post-Brexit trade performance.
The prognosis is not good. The UK has lost around a fifth of its
share of goods exports, a far worse performance than any of our
competitors, with firms missing out on £74 billion worth of
trade.
But rather than relitigating the past, we should focus on
securing a better future for these damaged sectors of our
economy. The Government should revamp its industrial strategy and
sharpen its focus on the sectors that retain strengths like
pharmaceuticals and aero-engineering.
Securing better export opportunities in these sectors is going to
require closer alignment with the EU to bring British firms back
into complex supply chains. Taking this hard-headed approach will
require careful negotiation. But the benefits for firms, jobs and
the wider economy will make those hard yards worth the effort.
Notes to Editors
Leaving EU Behind? is authored by Sophie Hale, Stephen
Hunsaker and Simon Pittaway.
