How the Brexit deal is affecting international trade

The new Brexit deal significantly hampers UK businesses’ ability to trade with the European Union, new Santander research has found.

How the Brexit deal is affecting international trade

The Autumn 2021 edition of the Santander Trade Barometer shows that a substantial proportion of businesses now find buying from and selling to Europe more time consuming and costly, and many say they will prioritise relationships with countries outside the EU as a result.

 

Examining the new Brexit deal

The trade agreement finalised between the UK and the EU on Christmas Eve 2020 was designed to provide businesses with a clear framework for future trade. But the Trade Barometer research shows businesses now face considerable friction in their dealings with their European counterparts.

More than a third of businesses (37%) say the Brexit deal has made trading with the bloc more time consuming; the same proportion report having to pay higher tariffs and charges since the agreement came into effect on 1 January 2021.

These issues are felt particularly acutely in sectors such as manufacturing and wholesale & retail: almost half of the UK’s manufacturers (47%) and 56% of wholesalers & retailers say trade with the EU takes up more time, while some 45% of manufacturers and 57% of wholesale & retail businesses now face higher tariffs and related charges.

A quarter of all businesses (25%) say they have been negatively impacted by their inability to recruit EU workers as a result of Brexit, while almost as many (23%) feel that the resulting increase in costs and bureaucracy prohibits them from continuing to trade with existing EU markets.

More than three-quarters of all businesses (78%) in the Autumn 2021 wave say they have now experienced some form of negative consequences from Brexit. This is a rise on the 72% recorded in the spring 2021 edition.

And Brexit is expected by 45% of businesses to have further negative impacts on their operations over the coming 12 months – second only to the ongoing consequences of the pandemic (52%). Among wholesale & retail businesses, 61% expect further negative impacts from Brexit, while the rate for producers and suppliers of food and beverages is 67%.

 

EU trade still vital for UK

The difficulties faced by UK exporters and importers are of particular concern given the ongoing importance of Europe for Britain’s overseas business activity: Santander’s research shows that 81% of UK businesses trading on the international stage currently operate in the EU.

Looking at the overall Brexit deal in its current form, 38% of international businesses now feel the agreement is ‘not sufficient’ for them to continue to trade with the EU, compared with just 33% who say the deal is adequate for them to carry on.

The Autumn 2021 Trade Barometer shows that businesses are more likely to report that exports have declined since the start of 2021 than increased. More than a quarter of international businesses (26%) say they are now exporting less – globally, not just to the EU – than at the end of last year, while 17% say exports have risen.

Clearly, the pandemic has played a significant role in reducing demand – both domestically and internationally – over the past 18 months. But the main reasons given by businesses exporting less, are rising costs (cited by 60%) and extra regulations in EU markets (42%). Only 34% say the fall is due to COVID-related falls in overseas demand.

 

Looking for new opportunities

Meanwhile, Brexit has prompted many businesses to seek opportunities elsewhere in the world. The Autumn 2021 Trade Barometer shows that a quarter of businesses (25%) intend to prioritise trading relationships with non-EU countries as a result of the Brexit deal; by contrast, 18% plan to focus on opportunities within the bloc.

Brexit has also encouraged businesses new to exporting to look further afield. Among businesses which plan to trade internationally for the first time over the coming year, 46% say they will prioritise non-EU activity. More than half of this group (53%) report that the length of time it took to strike and finalise the Brexit deal – more than four-and-a-half years from the referendum date of June 2016 – has reduced their appetite to forge ties with the EU.

While businesses face a range of new challenges when it comes to exporting and importing, international trade will play a hugely influential role in recovery from the pandemic and generating future growth for UK businesses. It is more important than ever, therefore, that our international businesses are given the support and guidance they need to succeed in global markets.

 

How we can help

Santander has a team of sector experts, who work with businesses to provide both financial and non-financial solutions tailored to businesses in their respective sectors. The team understand the different challenges that businesses in their sectors are facing and work with their own ecosystem of solution providers to support businesses in overcoming these challenges. The team also work closely with our international specialists to enable us to help businesses with both their domestic and international growth. Through our global networks of solution providers, we can help businesses save time and money when accessing the support they need to grow internationally, whether that is helping a business to find new connections, providing regulatory support and training, or guidance with shipping and logistics. 

Cracking new markets. It Starts Here.

If you need any help, please contact us on: international@santander.co.uk

For more information, please read the full Trade Barometer report

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