China replaces Germany as UK’s biggest import market
UK trade with the EU collapsed by nearly a quarter at the start of 2021 compared with three years before as Brexit and Covid-19 disruption hit exports, while China replaced Germany as the biggest single import market, according to official figures.
The Office for National Statistics said total trade in goods – which includes imports and exports – with EU countries fell by 23.1% in the first three months of the year, compared with the first quarter of 2018 before the pandemic began and before Brexit uncertainty became marked.
Trade with countries outside the EU fell by just 0.8% over the same period, reflecting the impact of new border checks on exports to the continent under the Brexit deal agreed between Boris Johnson’s government and Brussels.
Six months on from the end of transitional arrangements with the EU, in a report published to assess the impact on trade of the pandemic and Brexit, the ONS said there was evidence of disruption at the start of the new trading relationship as activity around ports dropped and UK exporters struggled with new paperwork.
Exports to Ireland suffered the sharpest proportionate decline among the UK’s top partners, while falls were also consistent across Germany, France and the Netherlands.
China replaced Germany as the biggest import market for the UK in spring 2020 for the first time on record, as the spread of Covid-19 lifted demand for Chinese textiles used for face masks and PPE.
Imports were also lifted by heightened demand for Chinese electrical goods during lockdown, while China was the first big economy to recover from the pandemic and the only big country to record growth in global trade last year.
Germany had previously been the UK’s most dominant import market since modern records began in 1997, with the exception of six months at the end of 2000 and start of 2001, when more was imported from the US.
The ONS said imports from Germany had been in decline since April 2019, coinciding with Brexit uncertainty and previous EU exit dates. The Covid-19 pandemic has also weighed on German car production and exports worldwide. UK sales dropped in January due to the closure of car showrooms during lockdown.
The prime minister has insisted that disruption to EU trade is due to short-term “teething problems” that can be overcome in time as both sides adapt to the new trading relationship, while seeking to strike new trade deals with other countries around the world.
However, business leaders say that Brexit comes with permanently higher costs, with consequences for the wider British economy.
Naomi Smith, the chief executive of the pro-EU campaign group Best for Britain, said businesses were losing money and facing higher costs.
“They’re struggling to cope with costly red tape imposed on them by the government’s last minute, bare-bones deal with the EU. For them, promises that trade with other countries would ride to the rescue have not materialised,” she said.
The drop in exports at the start of the year comes after a rush in stockpiling by UK firms at the end of 2020 to avoid border disruption. Trade declined in January as businesses held back from moving goods and ran down existing supplies, before activity gradually picked up.
The ONS said that while it was difficult to disentangle the Brexit impact from the fallout from the pandemic, companies had struggled with the consequences of Britain leaving the EU in recent months.
According to the report, the number of companies reporting Brexit as their main challenge rose at the start of the year – replacing Covid-19 as the biggest problem for the largest proportion of firms surveyed by government statisticians.
Among firms that have exported in the past 12 months, as many as 38% said extra paperwork had been a challenge to exporting since February. This has remained the case to April. Exports of food and live animals to Ireland faced the greatest number of new checks, culminating in a decline of 65.9%, about £300m, between December and January.