A lack of alignment with key trading partners, including frictions resulting from Brexit, have held back the UK economy by an estimated £12 billion – equivalent to around £400 per household in extra economic output.
The analysis from business group Logistics UK, which represents the industry that is vital to all economic activity, at home and abroad, reveals closing the gap between the UK’s current trade intensity (how much the country trades relative to the size of the economy and its 2019 level), could be worth around £12 billion to the UK economy in the long run1. And today (23 June) the organisation is launching a campaign to urge the UK government to generate trade-led growth by fixing border friction and smoothing trade.
Speaking today ahead of meetings in Brussels with senior policymakers and industry stakeholders about the UK-EU trading relationship, Logistics UK Chief Executive Ben Fletcher outlines how closing the current “trade-intensity gap”, through better alignment with trading partners and removing border frictions, could unlock billions in economic output without increasing taxes or public spending:
“The UK grows when it trades, but unnecessary trade friction is increasing costs, reducing competitiveness and holding back growth,” he says.
“In the current climate of geo-political uncertainty, we need to ‘control the controllables’. Fixing the friction in the trade we already do could generate billions for the economy, drive growth and raise living standards, with our analysis showing that closing the UK’s trade-intensity gap has the potential to boost the economy by £12 billion. Removing Brexit red tape with our closest trading partner would go a long way to addressing this challenge.”
In the ten years since the Brexit referendum in 2016, UK exports have fallen significantly both to the EU and globally, according to analysis by independent transport economists MDS Transmodal for Logistics UK.
By tonnage, total goods trade with all countries and in both directions is down by almost 10% in that decade; UK goods imports have decreased 3.6% and UK goods exports have decreased 20.7%.
By volume, UK exports to the EU fell by 15.9% in the past ten years; and UK exports to non-EU Europe and the Mediterranean region fell by 5.0%, while exports to Rest of World fell by 37.2%.
Increased processes and friction when crossing borders are likely causes of the decline according to Logistics UK, and Fletcher urges the UK government to agree practical steps to ease trade:
“The review of the UK-EU Trade and Cooperation Agreement (TCA), centred on the EU-UK Summit confirmed for 22 July, must focus on removing non-tariff barriers with what remains our largest trading partner. It’s essential that the summit maintains momentum on the removal of costly border checks for meat and dairy products, as well as agreeing further reductions in trade friction such as addressing slow digital border processes and restrictions that limit the number of days HGV drivers and other logistics workers can spend in the 29 Schengen Area countries.”
Logistics UK has been consistent in calling for a comprehensive sanitary and phytosanitary (SPS) agreement between both economies and the UK government predicts an SPS agreement could add £5.1bn a year to the UK economy. Logistics UK’s own analysis shows it could also reduce export costs by up to 5%-8% on affected agri-food goods and save £150–£250 per consignment, which is especially significant for “groupage” operators as they pay fees on each of the smaller shipments that are combined to make a single load.
Logistics UK is also urging the development of a modern digital gateway to streamline border operations. A “Single Trade Window,” designed with the logistics sector and interoperable with EU systems, would mean businesses who trade internationally no longer need to duplicate effort by submitting the same data to numerous government systems.
The business group is also pressing for professional drivers to be exempt from EU travel restrictions. Currently, non-EU nationals are restricted to stays within the Schengen area of up to 90 days in a rolling 180-day period. With every day spent in the EU counting towards the limit, including holidays, HGV drivers doing frequent or extended runs can quickly use up their allowance.
“More than half of UK-EU goods trade moves via the Short Straits, and the EU accounts for around 40% of UK exports,” concludes Fletcher. “A targeted effort to reduce trade friction would have a significant and immediate economy-wide impact and drive valuable growth for both economies.”
Logistics UK is one of the UK’s biggest business groups, representing logistics businesses which are vital to keeping the UK trading, and more than seven million people directly employed in the making, selling and moving of goods. With decarbonisation, new technology and other disruptive forces driving change in the way goods move across borders and through the supply chain, logistics has never been more important to UK plc. Logistics UK supports, shapes and stands up for safe and efficient logistics, and is the only business group which represents the whole industry, with members from the road, rail, water and air industries, as well as the buyers of freight services such as retailers and manufacturers whose businesses depend on the efficient movement of goods. For more information about the organisation and its work, please visit logistics.org.uk
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