UK Trade in the Wake of Brexit

Rebecca Freeman, Kalina Manova, Thomas Prayer () and Thomas Sampson
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Thomas Prayer: University of Cambridge

No WP2022/12, Single Market Economics Papers from Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (European Commission), Chief Economist Team

Abstract: This paper studies the impact of Brexit on the UK’s trade with the EU relative to its trade with the rest of the world. We find no evidence that uncertainty and anticipation effects led to a significant decline in relative UK trade with the EU during the period after the UK voted for Brexit in 2016 and before the change in policy was implemented under the new Trade and Cooperation Agreement (TCA) in 2021. However, the UK’s departure from the EU’s single market and customs union at the start of 2021 caused a major shock to UK-EU trade. We estimate that the new TCA trade relationship led to a sudden and persistent 25% fall in relative UK imports from the EU. In contrast, we find a smaller and only temporary decline in relative UK exports to the EU, but nevertheless a large and sustained drop in the extensive margin of exports, driven by the exit of low-value relationships. The timing and asymmetry of Brexit effects on UK imports and exports is puzzling and provides evidence of important differences in adjustment to integration and disintegration shocks.

Pages: 48 pages
Date: 2022-12
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (5)

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https://ec.europa.eu/docsroom/documents/53019/atta ... en/renditions/native (application/pdf)

Related works:
Working Paper: UK trade in the wake of Brexit (2022)
Working Paper: UK trade in the wake of Brexit (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bda:wpsmep:wp2022/12

DOI: 10.2873/888076

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