Brexit’s impact on UK exports

On 20 March, I published a paper on UK trade analysis with Policy Exchange (Less than Meets the Eye). The paper identifies five traits in UK trade that lead to significant misinterpretation of trade data:

• the rapid gear shift into high-value/low-volume manufacturing in the UK auto industry;
• the £55 billion impact on the UK of global downturns in our two biggest export industries (aerospace and automotive) from 2020 to 2023;
• around £5 billion of pre-Brexit exports of clothing and footwear that turn out to have been re-exports;
• the chronic, slow growth of UK goods exports to the EU before Brexit, which skews doppelgänger comparisons;
• the £5 billion of advanced engineering exports now sold as services.

The paper adopted a sectoral approach. It reviewed the state of multiple industries in the UK, their track records, and the impact of recent events in respective global markets.

This approach invited an obvious next step: why not work through all UK export sectors to see specifically which goods are responsible for post-Brexit export declines, and whether the Brexit-related declines do indeed add up to 15%?

This could never be a scientific approach: at any one time, multiple factors are at play in any single UK manufacturing sector and the global markets they sell into. But a sector-by-sector approach can at least nail down the actual goods responsible for the UK’s poor, post Brexit performance, and examine the degree to which Brexit can be legitimately blamed.

The £26 billion black hole

UK exports to the EU in 2024 were down £26 billion as compared to 2019 (2019 prices) – a fall of 16%. That’s a fairly solid number, because the long-term growth rate of UK goods exports to the EU (excluding precious metals) was just 0.6% p.a. Even if Brexit had never happened, there’s no reason to expect that exports to the EU would have grown – or at least grown by much – in the four years that followed.

The big three contributors to this £26 billion shortfall in the 2024 data are: apparel, chemicals and autos. Together they account for £11 billion of shortfalls in 2024 or around two-fifths of the total.

The £3.8 billion shortfall in apparel exports has been consistent since 2021. This was the year the UK-EU Trade and Cooperation Agreement (TCA) came into effect and removed re-exports from UK trade data. As my paper demonstrated in Chapter 3, this drop in apparel exports is provably re-exports. The clothing involved is unlikely to have ever seen the inside of a UK factory before Brexit.

Incidentally, the issue with re-exports also applies to other sectors – especially food products and agriculture – but apparel is the sector where re-exports have their greatest impact on the data.

Next, chemicals, where exports were also down by £3.8  billion in 2024 compared to 2019. The clue to what’s going on is the £3 billion shortfall in exports to markets outside the EU (see table below). This is part of a phenomenon that has been observed since 2022 which shows UK exports to non-EU countries performing just as poorly as exports to the EU since Brexit (and in this case, proportionally worse). Both Harry Western and John Springford have commented on this. There has, however, been little progress in breaking down the phenomenon into its constituent sectoral parts.

Industry research shows the UK chemicals sector has systemic challenges unrelated to access to EU markets. The industry itself has been in decline for the past 15 to 20 years, according to the Chemical Industry Association (CIA).[i] In late 2024, the CIA reported production down 25% on pre-pandemic levels. It blames high energy costs, rising labour costs and weak demand. Commercial sources tell the same tale. Inneos, which shuttered ethanol production in Grangemouth in January, blames high energy costs and carbon taxes.[ii]

Where exactly are the export shortfalls? Analysis of the export data shows that lower exports are concentrated in one specific sub-sector: petrochemicals. Exports of petrochemicals to all markets plunged by £4 billion in 2024. In fact, the petrochemicals subsector accounts for three-quarters of the total, global shortfall in chemicals exports since 2019. This means most export shortfalls can be tied directly to lower production of oil and gas in the North Sea.

Industrial decline isn’t the whole story. Re-creating the EU’s REACH regulatory system is estimated by DEFRA to have cost the industry a hefty £2 billion.[iii] But that’s a one-off Brexit cost. And there is no getting around the fact that accounting for the relative size of export markets, exports to non-EU markets have been hit harder than exports to EU markets since 2019.

Source: ONS, UK Trade in goods by Classification of Product by Activity, time series dataset, Quarterly and Annual up to and including 2024 Q4. Published February 13^th 2025. Each sector is deflated according to an SITC export deflator (ONS IDEF series). These are specific to EU/non-EU markets.

Then there is the automotive sector, with a shortfall of £3.2 billion in exports to the EU as compared to 2019. As with chemicals, there’s a simultaneous fall in exports to non-EU markets (£2.1 billion). This makes a pure Brexit interpretation impossible. The root cause of lower exports is trouble in the global car industry, as detailed in Chapter 2 of my paper. For example, by the end of 2023, output across Germany, France, Spain and the UK was still just 73% of output in 2018.[iv] So, the UK was not alone. It is just unfortunate that automotive is our most-valuable export industry.

Then again, UK car output has underperformed the EU average since Brexit. And when accounting for the relative share of exports to EU and non-EU markets (40:60 when we exited the Customs Union), shortfalls in exports to EU markets have been consistently larger since 2020 as compared to exports to non-EU markets. But there are multiple non-Brexit reasons why exports to EU markets should be down slightly more than to non-EU markets since 2020.

1. Car exports have been pivoting steadily to non-EU markets for almost 25 years. According to ONS data, the EU took 70% of UK vehicle exports in 2000; 60% in 2008; and 50% in 2011. So, there’s a long-term trend to accommodate in the data.
2. Commercial factors. Nissan is the chief culprit for 2024’s poor export performance in EU markets. But that 13% decline in output from Nissan in Sunderland matched declines at Nissan plants in China (down 15%) and the US (down 13%).[v]
3. Comparative weakness in eurozone industrial production. The ex-Ireland series for eurozone industrial production was weak in 2023-2024, down around 4%. This matters to the auto industry, since 19% of UK auto exports to the EU are in fact car parts.[vi]

What this means is that if Brexit is an ongoing factor in lower exports to the EU, it is supplementary. It cannot be the dominant factor: our non-EU auto exports are down £2 billion as well.

Energy, pharma and food

The next four largest shortfalls mix Brexit with unrelated factors.

Exports of crude oil and refined petroleum to the EU are down £5.8 billion compared to 2019. This is nothing to do with Brexit. It has the same root cause as lower petrochemicals exports: falling North Sea production. Energy accounts for almost one-quarter of the total £26 billion shortfall in exports to the EU.

Pharmaceuticals is a complex case. Essentially, exports to the EU stagnated from 2009 and are in long-term decline. This is despite the pharma industry receiving by far the largest portion of spending on R&D of any sector in UK manufacturing. This is no place to delve into the political economy of the case, but the core point is pharma exports were already ailing in 2020. If Brexit is a factor, again it is supplementary. The £1.9 billion shortfall in non-EU exports demonstrates the point.

Finally, there’s food products and agriculture. These are clear Brexit candidates. Sharp falls are unmatched in global markets and industry complaints point to specific export complications. But this only applies to some sectors, as Catherine Mcbride has pointed out. And she has also pointed out that pre-Brexit stockpiling occurred, which skews comparisons with 2019. As with apparel, food is a sector where re-export activity was prevalent prior to Brexit. So, Brexit accounts for an undefined portion of shortfalls in food and agriculture exports – definitely some; possibly most.

The minor categories

The remaining shortfalls are a mix of genuine Brexit cases, re-exports and industries in decline.

• Jewellery is a minor casualty. The data is skewed by an £800 million spike in exports in 2019, but hallmark issues have plagued exporters.
• The £2 billion drop in footwear exports is a pure re-export story. The manufacturing and export data precisely mimic apparel.
• The computers and electronics export sector has been in decline since 2008. This sector delivered 22% of total goods exports in 2000; now it’s just 8%, according to ONS data. Nothing was going to save it.
• In beverages, losses skew strongly towards non-EU markets in 2019, so it’s difficult to see how Brexit is the cause.

This is where the shortfall story effectively ends. The remaining sectors exhibit minor losses that don’t materially add to the tally.

What’s the damage?

The next step is to take these sectors one by one and estimate the maximum proportion of the shortfall that can be reasonably attributed to Brexit.

First, the obvious candidates:

1. Food and agriculture: The data still contain hundreds of millions of pounds-worth of re-exports. But since that statistical extraction has yet to be done let’s leave them both as 100% Brexit ‘hits’ for now.
2. Automotive. Exports to the EU were bound to suffer more than exports to non-EU markets from 2020 but let’s take that mostly on the chin and attribute a hefty £1 billion of auto losses to Brexit. That balances the losses as between EU and non-EU markets for 2024.
3. Chemicals. Let’s acknowledge the costs of transitioning to UK REACH, and put one-quarter of the shortfall down to Brexit. It’s impossible to do much more, since petrochemicals account for three-quarters of the total decline in chemicals exports since 2019.
4. Pharmaceuticals. The sector had a chronic pre-existing condition. But supply chains have been disrupted by Brexit, so let’s attribute one-third of the current shortfall to Brexit. This roughly balances out the losses in pharma as well, as between EU and non-EU markets.
5. Jewellery. Given hallmarking issues, let’s blame Brexit for that £500 million shortfall in jewellery. This is what’s left after the one-off £800 million jump in 2019 is eliminated.
6. Miscellaneous.  Last, there’s all the minor sectors where shortfalls exist – like sports goods, games, and toys. Let’s attribute £500 million to Brexit, even though these are highly likely to be re-exports.

As for the rest, it’s not intellectually credible to go on. Shortfalls in apparel and footwear are provably re-exports. Shortfalls in beverages and electronics exports are significantly larger in non-EU markets. And as for that dominating £5.8 billion shortfall in energy, we only have ourselves to blame.

The net result of this sectoral breakdown is that just £6.1 billion of the current £26 billion shortfall in exports to the EU in 2024 can reasonably be attributed to Brexit. It implies that Brexit – at best – accounts for a 3.6% fall in UK goods exports to the EU when calculated on a sectoral basis. This is around one-quarter of the estimates based on doppelgangers that circulated in 2024. And once re-exports are extracted from food, agriculture and other sectors, it could easily fall towards one-tenth. So, a sectoral analysis delivers a number which is closing in on the 1.5% figure suggested by Harry Western in 2022.

Most export shortfalls are non-Brexit related

This exercise is not meant as a definitive assessment of Brexit’s impact on UK trade. The point is to identify the sectors responsible for the current £26 billion drop in exports and assess the most likely the trigger or triggers for each sector. Inevitably, the attribution of causation is calculated guesswork. But the implications are sobering.

Consider: UK goods exports to the EU flatlined for the two decades before Brexit. Then they fell 16% after Brexit. Fair enough. But dissect that 16% fall sector by sector, and three-quarters can reasonably confidently be attributed to factors other than Brexit. This leaves insufficient goods for doppelgänger models to cling on to when asserting that Brexit has had a 15% impact on exports. The only way to reconcile sectoral and doppelgänger analyses is to assume that without Brexit, UK exports to EU would have risen by about 12% from 2020 – but for no obvious reason.

As for the remaining 3.6% – worth £5.9 billion – two-thirds or £2.4 billion of that decline is due to food products and agriculture. This is highly relevant to recent firm-level analysis. It is likely that these export sectors include a far higher proportion of small companies as compared to, say automotive or chemicals. If so, that would help to explain findings by Thomas Sampson and others (LSE), that small firms have been disproportionately impacted by Brexit.

And since re-exports is clearly a dominant factor in export shortfalls, it would be worth investigating whether – prior to Brexit – the companies engaged in re-exports of apparel and footwear were predominantly small firms as well. If they were – and it seems likely – this would reconcile LSE observations with analysis by Gasiorek and Tamberi, which show that food and textiles dominate post-Brexit export falls.

The UK’s unique misfortune

One big question remains: if Brexit is not principally to blame, then why exactly have UK exports underperformed other countries since 2019.

There are three reasons. First, because UK exports to the EU already underperformed other countries during the two decades prior to Brexit. Second, because automotive and aerospace delivered a higher proportion of UK exports in 2019 than for any other G7 country, and they were the worst-hit global manufacturing industries during the 2020 to 2023 period.

The third reason is that the industries that did well in 2020 to 2023 were the sectors in which the UK is weak, specifically energy and pharmaceuticals. Consider just two:

• Energy: US hydrocarbon exports shot up by US$125 billion in 2022 (current prices)[vii]. Canada’s energy exports rose from C$95 billion[viii] in 2020 to C$241 billion (current prices) in 2022.[ix] This was a rise of US$112 billion.[x]
• Pharmaceuticals: The big vaccine exporters – Belgium, Germany and the US – saw pharma exports jump by US$38 billion, US$36 billion and US$29 billion[xi] respectively from 2019 to 2022 (current prices).

These are big numbers. Any one of them would have transformed aggregate UK trade data, and our comparative performance since Brexit. And that point should be top of mind for every economist who comments on UK trade. If public policy had successfully cultivated our energy and pharmaceutical industries over the past decade – as it did in the US, Canada, Belgium and Germany  – then doppelgängers would have barely registered a blip.

Phil Radford was a Senior Advisor at the Australian Trade and Investment Commission in Sydney, from 2019 to 2023.’

[i] Chemical Industry Association, Project 2035. Page 5.

[ii] Financial Times: Britain’s chemical industry dying out, says Jim Ratcliffe, January 2025.

[iii] According to a DEFRA assessment. The Chemical Engineer: UK chemicals sector on path of ‘steady decline’ according to new report,  January 2025.

[iv] European Automobile Manufacturers Association (ACEA). Economic and Market Report, Full Year. (2019, 2020, and 2023).

[v] Nissan Motor Corporation: Global Newsroom. Nissan sales, production and exports for December and 2024.

[vi] One example is car engines made by JLR at Wolverhampton which are shipped to Nitra in Slovakia for Defender models.

[vii] US Department of Commerce, Bureau of Economic Analysis, U.S. International Trade in Goods and Services, December and Annual 2022. February 2023. Exhibits: 3,6,7

[viii] Natural Resources Canada, Factbook 2021. Page 10.

[ix] Natural Resources Canada, Factbook 2023. Page 12.

[x] UK natural gas exports shot up by £28 billion (US$ 34.6 billion) in 2022, but this was re-exports.

[xi] UN Comtrade (HS30), 2022 versus 2019.