The authoritative source for independent research on UK-EU relations

26 Apr 2022


UK-EU Relations

Unravelling deep integration: UK trade in the wake of Brexit

This paper studies the impact of Brexit on the UK’s trade with the EU relative to its trade with the rest of the world. We find no evidence that uncertainty and anticipation effects led to  a significant decline in relative UK trade with the EU during the period after the UK voted for  Brexit in 2016 and before the change in policy was implemented under the new Trade and  Cooperation Agreement (TCA) in 2021.

However, the UK’s departure from the EU’s single market and customs union at the start of 2021 caused a major shock to UK-EU trade. We estimate that the new TCA trade relationship led to a sudden and persistent 25% fall in relative UK imports from the EU.

In contrast, we find a smaller and only temporary decline in relative UK exports to the EU, but nevertheless a large and sustained drop in the extensive margin of exports, driven by the exit of low-value relationships. The timing and asymmetry of Brexit effects on UK imports and exports is puzzling and provides evidence of important differences in adjustment to integration and disintegration shocks.



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