Brexit causes difficulties for more than 60 per cent of UK firms - report

Study finds higher prices and reduced competitiveness due to EU withdrawal

Andrew Woodcock
Political Editor
Thursday 06 May 2021 10:36
Comments

More than three out of five UK firms (61 per cent) are reporting difficulties due to Brexit, resulting in rising costs, higher prices for consumers and reduced competitiveness, according to a new report.

Almost a quarter (24 per cent) of exporting firms reported that Brexit has caused sales to the EU to fall, while one-third said that imports from the continent were down.

Crucially, the study by the London School of Economics drew on real-time business survey data from the CBI stretching right up to April, well beyond the “teething problems” associated with the 1 January transition out of the single market and customs union.

The study by the LSE’s Centre for Economic Performance found that 37 per cent of UK firms were reporting delays as a result of Brexit.

More than one-third (36 per cent) said they had faced additional customs and administrative costs.

And almost a quarter (22 per cent) said they were experiencing higher levels of regulatory checks.

It was not only at the UK/EU border where problems were being experienced, with 20 per cent of businesses reporting increased difficulty in moving goods from Great Britain to Northern Ireland, the study found.

Meanwhile, despite Boris Johnson’s assurance that his Trade and Cooperation Agreement with Brussels meant no new tariffs on UK exports, some 16 per cent of businesses reported that they have had to pay additional tariffs.

The report suggested that this may result from general uncertainty about tariff policy following Brexit, or from the fact that the UK has managed to roll over only 63 of the 70 trade agreements with outside countries from which it benefited as an EU member.

And the report found it was “likely that Brexit will have a sizeable impact on services trade”, although data is not yet available. 

“The percentage of firms reporting Brexit issues relating to trade in services is lower than those relating to goods trade, but a sizeable proportion of firms report difficulties in services trade despite a four-year period to prepare for these barriers,” wrote authors Josh De Lyon and Swati Dhingra.

The negative impact of Brexit is being masked to an extent by the UK’s recovery from the coronavirus pandemic, which led to a “notable increase in economic activity” in April.

Businesses are more optimistic about their prospects over the next three months than they have been at any time since the start of the outbreak, said the report.

“Investment in both physical and human capital will be crucial to the long-term adjustment to Covid-19 and Brexit,” said Mr De Lyon. “We find that in the manufacturing sector, more firms expect to increase expenditure on worker training and innovation in the next 12 months than to decrease it – a reversal of the situation a year ago.

“But in the services sector, which includes hospitality and retail, firms are less optimistic. Data from January 2021 shows more services firms expected to reduce spending on training than increase it over the next three months.

“Evidence from previous economic shocks suggests that people who remain in businesses or industries hit by the shock suffer more than those who are able to make a transition to other industries. Training programmes and adjustment assistance can help to ease such transitions.”

And Dr Dhingra added: “The evidence in our report shows that Brexit played a role in the sharp drop in UK trade in 2021, with a sizeable share of firms experiencing issues in trading with the EU such as delays at the border and burdensome administrative costs. This has translated into rising costs, higher prices and reduced competitiveness.

“The government should seek to support businesses in the transition to new trading relationships and to ensure that the increase in border costs is minimised.”

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in