Brexit Cuts Exports by $34 Billion, Hitting Smaller Firms Hardest: LSE

Brexit has reportedly led to a staggering reduction of approximately $34 billion in goods exports from the UK, with smaller businesses bearing the brunt of this economic shift, according to a recent analysis by the London School of Economics (LSE). The Trade and Cooperation Agreement, implemented in January 2021, has been identified as a significant factor contributing to this decline, which amounts to roughly 6.4 percent in exports. Specifically, the value of goods traded with the European Union witnessed a notable drop of 13.2 percent.

The research, titled “Deep Integration and Trade: UK Firms in the Wake of Brexit,” examined over 100,000 firms from 2012 to 2022, providing insights into the ramifications of the TCA. It highlighted that about 14 percent of businesses that previously exported to the EU ceased operations in that market after the agreement took effect. This translates to approximately 16,400 firms no longer participating in EU trade.

When evaluating the impact of the TCA based on firm size, researchers discovered that nearly all companies, except the largest fifth—those with over 107 employees—experienced a downturn in their export activities. Among those that persisted in exporting to the EU, the smallest businesses, defined as having six or fewer employees, saw a dramatic average reduction of 30 percent in their EU export value. Meanwhile, firms in the middle tier, characterized by having between 17 and 40 employees, faced a 15 percent decline.

Interestingly, larger firms managed to sustain their export levels, which somewhat mitigated the overall decrease in UK trade. The findings further clarified that the TCA did not affect UK firms’ exports to non-EU countries, indicating that the 6.4 percent decrease in total exports was solely attributable to diminished trade with the EU.