LONDON: Political uncertainty caused by leaving the EU was beginning to be felt by manufacturers even before the departure and signing of the trade deal last year, new research suggests.
Manufacturing firms were seeing their dependence on the EU as an export market decline even before the impact of Brexit, said Make UK and business advisory firm BDO LLP.
Their study indicated that only firms in the West Midlands and Scotland saw the share of exports to the EU increase slightly last year.
Trade with the EU has improved recently but quarterly trade data for the first three months of the year shows exports were still 27% below the same period a year ago, said the report.
Make UK said this supported anecdotal evidence that many companies were already choosing not to supply the EU or that EU customers were turning away from UK-based companies.
The introduction of new customs procedures with the EU, in addition to the pressures on the logistics sector, has created a challenging start to the year and drop in exports across many regions, said Make UK.
Chief Executive Stephen Phipson said: “It’s clear that even before our final departure from the EU that political uncertainty was hitting exports to the bloc.
“While opportunities are opening up elsewhere the EU will remain our biggest trading partner through sheer fact of geography.
“As such, with major changes coming down the track, especially the imposition of import controls, it’s vital that the government works with business and the EU to smooth out critical issues such as customs procedures.
“Otherwise there is a risk that the drop in exports to the bloc we have seen over the last couple of years will become structural and permanent.”
Richard Austin, of BDO, said: “The practical difficulties faced by manufacturers on the ground go way beyond Brexit teething problems. They were confronted by a unique set of challenges last year, not least of which was the devastating impact of Covid-19 on their workforce and supply chains.
“While we’ve seen some promising signs of recovery in the latest quarterly figures, the dent to UK exports going to the EU last year is hardly surprising.”
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