Britain has spent 74 billion in goods sales since Brexit and has shifted strongly to a service-led economy, according to a new study that throws cold water on the hope of reviving industries in the country, a desire recently set by Andy Burnham.
The Resolution Foundation, a think tank, found that some of the country's most important industrial sectors, including cars and pharmaceuticals, were the biggest risks since the UK formally left the single market and customs union in 2020. The overall economic share of exports is set to fall by a fifth between 2019 and 2024, leaving the world's largest exporter of goods anywhere, down by £4 billion. The G7 group of major economies.
Worse, researchers put the blame on Brexit itself rather than higher energy prices or a flood of cheap Chinese goods, both of which are often cited as the cause of Britain's trade weakness. The findings are set out in detail in the foundation's report on the UK's post-Brexit trade performance, which calls for a rethink of industrial strategy.
The pain is concentrated in the goods that the rest of the world buys more of. “The UK has lost some of the world's most traded goods, including pharmaceuticals, electronic microcircuits and data processors,” said Sophie Hale, director of research at the Resolution Foundation. “Some of the energy that used to be there has disappeared in the last five years. Comparisons have been found in road vehicles, chemicals, milk, living animals for food and non-ferrous metals.”
Since the survey, Britain has dropped from 11th place in the world to 14th place. The loss sits among eight priority, high-growth sectors the government has identified as critical to future prosperity, including advanced manufacturing, clean energy, defense and life sciences.
Business sense underlines the difficulty. In a survey by the British Chambers of Commerce, an industry stakeholder group, 54 percent of UK exporters said the trade and cooperation deal struck after Brexit had made it difficult to sell in the bloc, and that “urgent change” was needed. Only 16 percent felt that the agreement helped them increase their sales abroad. The lobby group's assessment that EU trade is getting tougher comes from Resolution Foundation data, and echoes earlier warnings that the UK-EU trade deal has failed to boost exports as border tensions worsen.
The pressure did not fall evenly. Smaller firms have suffered, a pattern Business Matters tracked as UK exporters grapple with a £27bn Brexit, with smaller businesses seeing EU-related exports fall faster than their larger rivals.
Brexit has also accelerated Britain's pivot to services, which now account for 59 percent of total exports, up 11 percent from 2019. Trade in services with the European Union has dipped, but nowhere near as much as in goods, according to figures from the Center for European Reform.
For Hale, that change is no cause for alarm. “Transition to services should not be seen as a problem,” he said. “Countries that specialize in services may be rich. So the duplication of this power should be considered a feature, not a bug.” His medicine is a clear-eyed test: protect sectors where Britain still leads the world, such as aero engines, compete with minorities where profits are slipping but not lost, such as pharmaceuticals, and be honest where the real prize is carving out niches rather than reclaiming share, as in electronic microcircuits.
The survey is sitting badly on Burnham, who is challenging Sir Keir Starmer's leadership after winning the Makerfield by-election in Greater Manchester. The mayor has promised to reinvent the north of England and bring services under greater federal control, yet the details reveal how difficult that will be when the UK's most profitable and competitive industry is now in services rather than on the factory floor. It's a familiar tension for readers who have followed how pro-Brexit states have become more dependent on EU exports than many thought.
Labor says it wants a warmer relationship with Brussels with a vet deal covering animals, plants and food, and an extension of Erasmus programs for students. The Center for European Reform warns that the economic gains from such measures would be small, and that the single biggest boost to UK trade would come from rejoining the single market, a move neither the current government nor Burnham support.
The BCC found that 55 percent of exporters would support compliance with EU product rules and standards, a move that would open up access to the single market but cede Westminster control over major regulatory areas. William Bain, head of trade at the BCC, warned that rejoining the EU “would jeopardize the trade deals we have made since we left and reduce our gains in areas such as AI where [the UK’s] the control mechanism is different”.
Gerard Lyons, a researcher at the Center for Policy Studies, a centre-right think tank, said rejoining the customs union, single market or the EU would reduce the UK to a “rule-taker”. He added: “The fundamental causes of the economic underperformance pre-Brexit are within our power to correct.”
