Not long after the UK left the EU in 2020, a Bristol-based firm called Eskimo started selling a new kind of high-fashion and energy-efficient electric radiator, based on new technology developed by academics in the city.
They planned to send them around Europe using the Channel Tunnel.
It was a timely product given Europe’s green ambitions, and with orders flowing, its Birmingham factory was being kept busy.
The boss Phil Ward tells me his start-up has continued to grow, but that in his view it could have been so much more without what he calls “the Long Brexit effect”: in 2020, 40% of his exports went to the European Union, and by 2025 it was just 5%.
The post-Brexit deal agreed with the EU by then-Prime Minister Boris Johnson in December 2020 guaranteed zero tariffs on exports to the EU, but Ward says that despite this, red tape and paperwork not directly related to tariffs were enough to create delays, costs and the expectation of hassle for prospective customers.
Eskimo did manage to export some goods to agents in France but it stopped selling directly to European consumers entirely. A planned expansion to Germany floundered.
And as Eskimo discovered when it attempted to export towel rails to Australia and New Zealand, both countries abide by international safety standards that are heavily influenced by the EU’s CE mark.
This matters because one theoretical potential Brexit benefit was that it would allow UK regulators to not follow the EU’s safety regulations and take a more pro-innovation, less regulatory approach for high-tech inventions.
Eskimo’s experience is one example of a broader trend reflected in export figures. The UK Trade Policy Observatory at Sussex University calculated a rapid 26% reduction in the different types of UK exports by 2023, while a new study from Aston University Business School using five years of more detailed trade data concludes a loss of 53.8% of the type of exports and 31.5% for imports.
These figures for “trade varieties” are falls in the number of products sent to different EU countries.
A decade ago, many economists argued the UK would sustain longer-term economic damage by leaving the EU and many believe that damage has come to pass.
But to make that call you have to compare what did happen with what might otherwise have happened were it not for Brexit and doing that is a matter of method and statistical judgement.
And that judgement has to account for the fact that the period since Brexit has been a time of huge global flux. The pandemic that struck in the spring of 2020, the war in Ukraine that began two years later and, more recently, the energy price shock sparked by the conflict in Iran all have to be accounted for.
So too does the question of whether a Brexit-free UK would have really kept up with the Silicon Valley tech boom in recent years to the extent Brexit Britain has.
The clear consensus of economists making the calculations say they have factored in the global turmoil when assessing Brexit’s impact. Others question their methods and the extent of Brexit’s impact.
Some of the most negative predictions back in 2016, including those that said the UK could experience a Great Depression‑style hit, proved unduly pessimistic. Whatever economic hit there was, it was not sudden enough to cause an instant recession.
But those who believe the UK did sustain longer-term economic damage by leaving the EU say the hit was no less profound.
What has happened in the Channel Tunnel tallies with the academic consensus that the UK economy is smaller now than it would have been based on the trajectory it was on in 2016.
The numbers range from about 3% to 8%. “The fact that it is harder to trade with the EU is about half the hit, in line with previous forecasts,” says lead author of the NBER research, Nick Bloom.
He attributes the rest to the consequences of what at times felt like near-nightly political meltdown during the Brexit negotiations. “The other half is the uncertainty from the fact the Brexit process itself was such an enormous mess… We can never get that second 4% back.”
These calculations are based on modelling how a UK still within the EU could have been expected to perform economically had it still experienced the pandemic and the 2022 energy shock but not Brexit.
The most recent study by the NBER takes account of population growth, and says the UK lost 6-8% of per capita output.
Bloom says he has used a variety of approaches including accounting for distance, economic gravity, the size of the economy and selectively omitting potential outliers.
There are, however, other figures. The authors, including Bank of England economists, also used a special survey of thousands of firms, accounting for a tenth of private employment, that was created by the Bank in 2016 to track Brexit reaction. The first Brexit analysis based on this survey was only published this year and updated on Friday and it shows how prolonged Brexit uncertainty hit commercial decision-making.
This entirely different firm-level method also leads to a conclusion of an economy about 6% smaller than without Brexit. That means an economy that would have otherwise grown about two thirds of a percentage point faster every year over the past decade.
What’s clear from the data is that many UK goods exporters, especially smaller ones, have not become used to Brexit and that in certain sectors it’s not getting any better.
Does the UK align itself with the US and its focus on lightly-regulated tech and in particular AI? Can a closer UK-EU relationship be squared with that? The EU has responded to the new economic nationalism with “Made in Europe” legislation that may require a certain percentage of parts to be made in Europe – it’s unclear if the UK is included or not. An early test will be steel next month, and then a deal to avoid UK-EU electricity car tariffs at the end of the year.
UK officials recently suggested establishing a single market for goods trade with the EU as part of the next phase of a Brexit reset, something the EU says is incompatible with current government red lines around freedom of movement.
Unions have shifted position from wanting to rejoin the customs union, to looking for a Swiss-style deal in the European Economic Area.
In recent weeks government ministers have begun to quietly say that these red lines are specifically for this Parliament and will be looked at again. What path Sir Keir Starmer’s replacement as prime minister decides to go down, we don’t yet know.
Next month’s UK-EU summit has now been postponed. Sir Keir had wanted to seal a deal to row back many of the post-Brexit frictions on food and farm trade that have impacted the cross-Channel trade flows. Other political parties have vowed to rip up the government’s EU reset or even try to row back on elements of the post-Brexit deal.
Put bluntly, the status quo will not hold. Ten years on, Brexit, and its impacts on the economy, remain very much with us, and the policy debates may be about to return.
Top picture credit: Getty Images
