The Brexit deal, which was supposed to offer the UK more control over its trade and borders, is causing some serious problems when it comes to trading with Europe. The agreement between the UK and the EU, known as the Trade and Cooperation Agreement (TCA), has led to a massive drop in trade between the two. In fact, since 2021, UK exports to the EU have fallen by 27%, and imports from the EU have dropped by 32%. The numbers paint a worrying picture for businesses that rely on trading goods across borders.

A Steep Drop in Trade

A report by Aston Business School dives deep into the impact of the Brexit trade deal. According to their findings, the sharp decline in trade is not just a short-term problem. It’s a sign of deeper, more lasting issues. Between 2021 and 2023, monthly data revealed a staggering 27% decrease in UK exports to the EU. On the flip side, imports from the EU also dropped by 32%, making it clear that the challenges of Brexit are far from over.

This decline isn’t just about the number of goods traded. It’s also about the variety of goods being traded. There has been a notable reduction in the range of products being exchanged between the UK and EU. In simple terms, fewer types of goods are crossing the borders. This drop is hurting both consumers and businesses, as some products that used to be easily available are now much harder to get.

UK Businesses Are Feeling the Heat

One of the most affected sectors is consumer goods. The report highlights a “significant decline” in consumer goods being exported to the EU. This means that the UK is losing its place in the EU’s value chain – the process where goods are produced, traded, and sold across different countries. The problem doesn’t stop at consumer goods. Agriculture and food products, which are vital exports for the UK, have also been hit hard. British farmers and food producers are struggling to meet the demands of their EU customers due to the extra rules and checks that Brexit has imposed.

The Red Tape Problem

A major reason for the trade slowdown is the mountain of paperwork and checks that businesses now have to deal with. These are known as non-tariff measures (NTMs). Before Brexit, goods could move more freely between the UK and EU, but now, each shipment is subject to extra inspections and procedures. This has made the whole process of trading slower, more complicated, and a lot more expensive.

For example, agricultural products like fruits and vegetables now require more rigorous checks before they can be imported or exported. This has led to delays, higher costs, and frustrations for suppliers. Last night, it was revealed that the UK government delayed its planned post-Brexit checks on fruit and vegetable imports for the third time, fearing that the added costs could lead to price hikes for consumers. This delay is a clear sign that the post-Brexit trade rules are still causing headaches for everyone involved.

The Long-Term Impact

The Aston Business School report warns that things could get even worse. The negative effects of the Brexit deal have been getting stronger, and the trade figures from 2023 show an even more severe decline than in previous years. What’s most concerning is that this isn’t just a short-term disruption caused by adjusting to new rules. It seems to reflect deep changes in the way the UK trades with the EU, changes that could stick around for a long time.

The UK’s dependency on the EU for key products, especially intermediate and capital goods (items used to produce other goods), hasn’t gone away. Despite the Brexit deal, British businesses still need materials and components from Europe. The challenge, however, is that it’s becoming harder and more expensive to get those materials, which could lead to even bigger problems down the road.

German Investor Confidence Hits Rock Bottom

Meanwhile, over in Germany, things aren’t looking much better. Investor confidence in the German economy took a surprising dip in September. Analysts didn’t expect such a sharp decline, and this sudden drop suggests that Europe’s biggest economy is also feeling the strain. The combination of Brexit’s fallout, rising energy costs, and slower economic growth in Europe has created a perfect storm of uncertainty.

The Energy Crisis Adds Fuel to the Fire

To make matters worse, Europe’s energy market is facing its own struggles. In France, for instance, power prices briefly turned negative. This odd situation happens when there’s more electricity being produced than what’s needed, usually due to a combination of low demand and strong renewable energy production. In this case, wind and solar energy production soared, while demand for electricity was lower than expected.

The situation is a reminder of the challenges that Europe’s energy markets are facing. Although renewable energy is a positive development, the unpredictable nature of demand and supply makes the energy market unstable at times.

Households Feeling the Pinch

The impact of rising energy costs is already being felt by households across the UK and Europe. A recent survey found that more than 1.7 million households in the UK don’t plan to turn on their heating this winter because they can’t afford it. That’s almost double the number of households from last year who were forced to make this tough decision. With the cost of living continuing to rise, many people are struggling to make ends meet.

What’s Next for UK-EU Trade?

Looking ahead, the future of UK-EU trade remains uncertain. The ongoing trade problems caused by Brexit are unlikely to be resolved anytime soon. Businesses are calling for more support to help them navigate the complex rules, but until there’s a significant change, the situation may continue to deteriorate. Whether it’s consumer goods, food products, or energy supplies, the effects of Brexit are being felt across every sector of the economy.