Post-Brexit UK Trade: An Update

Global trade made a strong comeback in 2022 following its pandemic-triggered collapse and decline. According to the UNCTAD, total global trade was 10% higher in May 2022 than in 2019, reaching $7.7 trillion in 2022Q1. 1 The trade boom, however, has bypassed the UK. This insight paper is our continued endeavour to understand the forces that have shaped this outcome, by following the UK trade dynamics and analysing the factors and mechanisms behind the aggregate figures. Between the period 2019 to 2022, the UK economy performed less well than the economies of most of its peers. Its GDP growth was lower than the average growth of the OECD, the G7, and the EU27. The UK also fell short in most GDP components compared to its peers, with low growth in consumption and investment, very low growth in exports, and the lowest growth in imports among all OECD countries. The only component that showed aboveaverage growth was government consumption. We build on Du and Shepotylo (2022), which assesses the trade impact of the newly installed EU-UK Trade and Cooperation Agreement (TCA) up to 2021Q3 and update the period of study to 2022Q1. Employing the same methodology, namely the synthetic differencein-differences (SDID) method, we estimate the causal impact of the TCA on the UK’s trade with the EU and the rest of the world (ROW) through exports and imports for the 15 months that has elapsed since the introduction of TCA. We find that the gap between the exports of the real UK and the synthetic UK has widened rather than closed, reporting 22.9% on average over the period. The post-Brexit export challenges are live and persistent. Further, we investigate the sizeable decline in UK imports since 2021.