Nearly a decade since the Brexit vote, a new analysis from the Centre for European Reform has put hard numbers on what leaving the single market has done to British trade – and the figures are not comfortable reading for anyone in government.
Researchers John Springford and Anton Spisak found that Brexit “has reduced trade in nearly every sector of the UK economy.” Exports of chemicals and pharmaceuticals are down 21%. Agrifood exports are down 29%. In services, travel is down 39% and financial services exports have fallen 24%. Total UK exports to the EU have fallen by around 12%, total imports by around 16%. Overall, Britain’s worldwide exports are down 5% and worldwide imports down 8%.
Those are not small numbers. They add up to a structural change in the UK’s trading position with the world’s largest single market that is not being reversed.
The study arrives at a particularly politically significant moment, and its core conclusion will make uncomfortable reading for those in Labour who have been advocating for a customs union as the obvious next step.
The CER’s argument is that most of the economic damage from Brexit stems not from leaving the EU’s customs arrangements but from leaving the single market. A customs union reduces barriers to goods trade – it essentially means the UK would align with EU external tariffs and avoid goods checks at the border. But it would do relatively little about services, and it would do nothing about the regulatory barriers, standards requirements and rules of origin complexities that have driven much of the trade decline in goods.
The researchers identify three main options for stronger links with the EU: a customs union, rejoining the single market in goods, or returning to the full single market. Their assessment is blunt – the economic benefits of a customs union would be limited; rejoining the single market in goods would do considerably more; full single market membership would do most of all.
The obvious problem with the last option is that it would likely require a return to freedom of movement and substantial contributions to the EU budget – both of which are politically explosive and would require a level of public consent that does not yet exist.
The paper urges politicians not to repeat the mistakes of the Brexit era by pursuing “options that are either unavailable on the terms they envisage, or unlikely to contribute meaningfully to economic growth.” That is a direct warning to anyone who has been talking up a customs union as a practical near-term solution.
The political backdrop to the report is significant. Both Andy Burnham and Wes Streeting – the two main contenders to succeed Keir Starmer if the Labour leadership contest now widely expected materialises – have said they want the UK to rejoin the EU one day. As we reported in our Rycroft Brexit not done piece, Philip Rycroft, who led the civil service preparations for Brexit, has called for a national debate on rejoining. As we reported in our Heseltine Brexit piece, the former Conservative Deputy Prime Minister has called those who sold Brexit “guilty men” whose promises have turned to dust.
The CER report’s authors note that discussions about what a much closer relationship with the EU would look like are “happening behind closed doors.” As we reported in our Brexit referendum polling piece, 48% of Britons now support a second referendum, including a quarter of 2016 Leave voters, and 55% support rejoining the EU in YouGov polling.
The gap between where public opinion is heading and where the political class is willing to go in public remains wide. The CER study is an attempt to sharpen that debate by putting sector-by-sector numbers on a damage assessment that is already, in the words of its authors, not going away.
Leave a Reply