Exports to Europe fall 40% as new rules kick in

EXPORTS to the EU fell by £5.6billion in January as Brexit trade rules and Covid hammered businesses.

The value of British goods bought by European countries tumbled 40.7 per cent during the first month since the transition period ended, according to Office for National Statistics data released yesterday.

Some of the decline was caused by a slump in demand from Europe because of Covid lockdowns across the continent.

But as increased customs checks hit business between the UK and the EU, its largest trading partner, the British economy shrank by 2.9 per cent in January.

Output was also squeezed by the post-Christmas lockdown, which led businesses to shut their doors again and kept consumers indoors. Part of the drop in economic activity was due to a 2.3 per cent contraction in the manufacturing sector – the first decline since April when the first Covid lockdown hit, driven largely by a fall in exports.

Allie Renison, of the Institute of Directors, described the figures as ‘horrendous’. She added: ‘The IoD long warned of the potential for a perfect storm of variables to collide, giving businesses so little time to adapt to new trading arrangements with the EU. Unfortunately that seems to have come to pass.

‘The challenge now is for Government to take steps in areas it can control to ensure this drop in trade with the EU does not become permanent, and negatively affect the UK’s wider export capabilities in the longer term.’ Germany revealed this week that its imports from the UK in January had slumped 56 per cent compared with a year ago, while France’s imports fell 20 per cent compared with the previous six month average. Both countries reported that trade with other countries was hurt less, implying Brexit was a major factor.

British exports of food and animals to the EU, including seafood and fish, were down by £700million or 63.3 per cent in January, which the ONS attributed to ‘stricter checks and certifications implemented by the EU’.

Britain’s imports from the bloc, which range from machinery to French cheese and Italian ham, were also down by 28.8 per cent.

But Lord Frost, minister for EU relations, advised caution over the gloomy data, explaining that January had seen a ‘unique combination of factors made it inevitable that we would see some unusual figures’.

‘As well as changes to our trading relationship with the EU, we also saw evidence of stockpiling late last year – this meant less need to move goods in January – [and] Covid lockdowns across Europe bringing reduced demand for goods overall,’ he said.

‘These effects are starting to unwind. The latest information indicates that overall freight volumes between the UK and the EU have been back to their normal levels for over a month now, i.e. since the start of February.’

The hit to economic activity, which left Britain’s output 9 per cent smaller than pre-pandemic at the end of January, was also better than experts had predicted. Sounding a note of optimism, Paul Dales, of Capital Economics, said January would ‘probably prove to be the low point for the year’.

‘Businesses had little time to adapt’