DUBLIN — Brexit has inflicted deeper opportunity costs on U.K.-EU trade than previously estimated, according to a new Irish study that compares the weakness of actual post-2020 goods flows to a parallel universe where Britain stayed within the single market.
The Economic and Social Research Institute (ESRI) in Dublin found that Britain’s exit has cut the potential value of goods exports to Europe by 16 percent, while EU exports to the U.K. were even more sharply lower, representing a 20 percent loss in potential sales.
The ESRI authors from Trinity College Dublin used a hybrid model that combined U.K. and EU data. They made a central assumption that, had Brexit not happened, U.K. import and export levels with European partners would have closely mirrored the EU’s relatively stronger internal trade performance last year.
The ESRI found that, instead, trade suffered in both directions — but in significantly different ways.
While many U.K. firms producing goods on low profit margins have stopped shipping entirely to the EU, goods flows into the U.K. largely have continued but at reduced volumes. The ESRI said this reflected the contrast in post-Brexit border regimes. While the U.K. has imposed few if any post-Brexit regulatory constraints on EU imports, British exports now face full EU customs and sanitary checks that increase costs and delays, making low-margin products unprofitable.
The ESRI found that U.K. exporters were losing opportunities and market share in most EU countries, most strikingly in their closest trading partner, Ireland, where the value of British goods last year slumped by 40 percent versus the no-Brexit model. Other sharp fallers included Spain (32 percent), Sweden (25) and Germany (24).
The lone EU member to record any U.K. import gains in the ESRI’s model was Luxembourg, up an eye-popping 76 percent. While the ESRI didn’t detail any reason why, the U.K. government pinpointed power generators as its top 2021 goods export to the diminutive duchy.
In the other direction of trade, only two EU nations managed above-expectations gains in exports to Britain: Latvia (38 percent) and Cyprus (33). Several others noted no discernible post-Brexit decline, including food and drink powerhouse Ireland.
But exporters in most EU states last year pruned shipments in line with what the report identified as the reduced appeal and certainty of the U.K. market.
The estimated 2021 value of those exports, compared to the report’s scenario where Britain stayed an EU member, was down most sharply in Malta (46 percent), followed by Finland (33), France and Greece (29), the Netherlands (27), Belgium (26), Poland (21), Portugal (20), Spain and Sweden (19), Germany (14) and Italy (12).
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