In his interview with the BBC’s Amol Rajan on September 16th, John Major confidently asserted that Brexit had made ‘our country weaker and poorer… having broken away from the largest richest free trade market the world has ever seen.’ Leaving aside that John Major appears oblivious to the fact that the UK has a tariff-free, quota-free trade agreement with the EU, he might almost be forgiven for thinking that Brexit has made us poorer. A decade of academic and other reports have made this assertion, and the BBC and many important media outlets have given them uncritical publicity.
The latest in this long procession is the Aston Business School’s report Unbound: UK Trade post-Brexit. The BBC, The Guardian, the Financial Times, the Independent and even CNN publicised this paper even though they clearly had little understanding of the methods it relies on or even its basic arguments. The Guardian and the Independent eagerly reported that the Aston analysis claims that ’between 2021 and 2023 monthly data shows a 27% drop in UK exports and a 32% drop in imports to and from the EU’. The report does not say this. Instead, it says that the authors calculate a 27% difference between actual trade with the EU and what the Aston researchers estimate this would have been without Brexit. Only the FT mentions that Aston’s estimates were based on what are called ‘doppelganger’ analysis – a controversial and unreliable approach. Even then, there was no mention in the FT that the Aston report omits all methodological explanation. Again, it was only the FT that pointed out that the Aston study included figures solely of trade in goods, hence omitting the half of UK trade which is services (and which has performed well since we left the EU). None of the media observed that if the Aston figures were correct, they indicated an improvement in the UK’s chronically negative balance of trade in goods with the EU when it was a member.
The actual changes in UK goods exports to the EU as recorded by the ONS are a 16% increase in value since immediately prior to covid and a 33% increase in imports. Most of this is price inflation. The trend in the volume of exports was broadly flat until early 2023. Exports to the EU have fallen by 9% since then, as demand, especially in Germany, has faltered. The volume of imports from the EU is well below the pre-Covid trend, but only by the same amount as imports from non-EU sources.
Somewhat oddly, all of Aston’s trade figures are in values rather than the inflation-adjusted volumes used by most economists. This distinction is important because of the high inflation since 2021. Also oddly, the Aston data came from a commercial company which collects and organises data from its original sources to sell to legal firms and other organisations. The Aston study does not say what these original sources are, and we have been unable to replicate their charts using trade data from the UK’s Office of National Statistics.
The Aston report also claimed that the variety of goods exported to the EU had plummeted, with 1,645 fewer types of British products exported to each EU country since 2021. The report then speculates, without presenting evidence, on why different commodities trade had fallen since Brexit.
This is completely unsatisfactory since it ignores important changes in data recording. Leaving the EU has meant a change from the EU’s Intrastat system, based on VAT returns, to HMRC’s more direct and accurate system using customs declarations. Also, changes in the international classification system mean that some commodities have changed codes, making the Aston team think that trade in those goods had declined or even ceased. Finally, the EU’s rules of origin have led to reclassifications in the national sources of trade. Goods imported into the UK and re-exported to the EU with minimal processing were previously counted as UK imports and exports. Now they are classified as trade between the actual producer (usually in Africa or Asia) and the EU. So, the Aston team thinks that UK trade has fallen even when nothing tangible has changed. Farcically, one apparent slump in trade, highlighted in the report and by the BBC and others, is in nuts (most of which are tropical). The same story goes for footwear made in China, Vietnam or Indonesia, and re-exported to the EU.
Of the hundreds of export commodities which the Aston team identify as falling to minimal levels, the cause is invariably either the rules of origin, a change in the international codes or simply because they have always been intermittently traded (such as one export of £1,000 worth of frozen camel meat). Only 34 export varieties require further investigation, and they were all either fish or chemicals. The chemicals cases could be due to an increase in price due to UK environmental regulations and high fuel costs. Some chemical exports, such as Acrylonitrile, used in the manufacture of acrylic fibres, have been falling since 2010. This is not due to Brexit: INEOS announced in October 2019 it would close the UK’s acrylonitrile plant due to safety concerns.
In short, we have a Report that claims improbably that goods trade with the EU would have been hugely greater in the absence of Brexit, based on opaque statistical techniques which are hopelessly flawed. Hunches on why trade in individual commodities has changed overlook important alterations in data collection and classification. The successes of trade in services are omitted. What is really damaging, though, is the way in which the media latched onto this report without troubling to understand its data or methods. Where are the fact-checkers when you need them? Lazy anti-Brexit bias in economic reporting has been a fact of life for years, but rarely as blatantly as this.
