Written by 11:05 pm Europe Economy

ESRI study shows Brexit weighs heavily on British trade with Europe

The decision by Britain to quit the European Union has had an outsized effect on British trade with the whole of Europe and may suggest a link to Britain’s current financial woes, according to a major new Irish study.     

The research by Janez Kren and Professor Martina Lawless at the Economic and Social Research Institute (ESRI), finds that British trade in terms of exports and imports in goods was 20% lower than it should otherwise have been if there had been no Brexit.             

The ESRI is among the leading researchers in Europe tracking the economic fallout since the UK’s 2016 referendum and Britain’s exit from the EU at the start of last year.            

As a benchmark, the study examined the large rebound in trade between the EU and the rest of the world after the pandemic, as well as the very slow recovery in trade between the UK and the rest of the world over the same period.                             

“The key finding of the paper is that Brexit has really slowed down UK-EU trade in both directions compared to what should be robust recovery after Covid-19” and which compares to a healthy recovery in trade across Europe with the rest of the world, Ms Lawless said. 

Imports from Britain to Ireland were 40% lower than they otherwise should be if Brexit hadn’t occurred, while there was no significant effect on Irish exports to Britain.  

“Ireland is a substantial outlier, with one-third of its imports coming from the UK in 2015, with closely integrated wholesale and retail sectors an important factor,” according to the study. “This had reduced to 28% in 2019 before falling further to 19% after the UK exit from the EU,” the study found.         

It was “still an open question” whether Brexit had contributed to Britain’s current financial turmoil but there was some evidence pointing in that direction, Ms Lawless said.   

Britain’s economy has struggled with low productivity and although it was difficult to identify the extent to which it was tied to Brexit that nonetheless “some of their current economic difficulties can be possibly assigned to moving away from their largest trading partner”, she said. 

Brexit would likely have disrupted supply chains for companies trading from Britain. The research isolated the effects of Brexit from the fact that Eurostat had changed some of the ways it measured trade inside and outside the EU. 

“Following the Covid-19 pandemic, there was a strong growth in EU imports and export trade with the rest of the world. In contrast, UK export trade globally has experienced much slower growth in the aftermath of the pandemic, while UK imports from the rest of the world increased considerably,” the study found.                        

The ground-breaking research doesn’t isolate the effects of the Northern Ireland Protocol because the economy in the North, which remains in the EU single market, is tiny in comparison with the economy of the rest of the EU.           

Figures on exports and imports of goods by the Central Statistics Office have since early last year pointed to a large boost to all-Ireland trade under the protocol. 

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