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ifo Institute: Brexit was unfavorable for cross-channel trade

Brexit has had an unfavorable impact on trade between the EU and the United Kingdom. According to figures from the ifo Institute, the UK’s share of EU27 goods exports fell from 6.2 percent in 2019* to 5.2 percent in 2021*, while its share of EU27 goods imports fell from 3.9 percent to 2.6 percent over the same period*.

“Some of the negative impact of Brexit on economic performance and trade already took place before the UK left the EU in 2020,” says Lisandra Flach, Director of the ifo Center for International Economics. “This was due to increased uncertainty for companies and the fact that they started adapting to the new environment soon after the referendum in 2016.”

The UK’s share of EU27 goods exports fell from 7.1 percent in 2015* to 6.2 percent in 2019*. Its share of EU27 imports fell from 4.4 percent to 3.9 percent over the same period*. More trade was then diverted away from the United Kingdom as the pandemic progressed.

Although the Trade and Cooperation Agreement did manage to avoid higher tariffs, since January 2021 most products have had to overcome at least one new barrier before they can cross the UK-EU border. Such barriers include inspection certificates as well as other documents and requirements that make the border crossing more time-consuming and complicated, resulting in higher trade costs. “These new barriers are devastating for businesses in the EU and in the UK, and especially for small and medium-sized enterprises,” Flach continues. “This is even more of a problem in the middle of a pandemic, since this might make it harder for companies to find alternative markets. SMEs in particular have less diversified supply chains, and the fixed costs of finding alternative trading partners may simply be too high for them.”

*January through November because no figures for December 2021 have been published yet. The intra-EU trade is also taken into account in the calculation.