China becomes UK's largest import market as EU trade slumps

Brexit | | MIC Customs Solutions |

New figures reveal China has replaced Germany as the UK's largest source of imports.


China has replaced Germany as the largest source of UK imports after trade with the EU continues to slump post-Brexit.

This is according to new figures from the Office for National Statistics (ONS), which also noted that drops in activity at the UK's ports and many businesses' struggles with new paperwork have also highlighted the impact of Brexit on trade.

EU trade down by a quarter from 2018

Overall, the ONS found that trade with the EU fell by 23 percent compared with 2018, though it noted that some of this decline could also be explained by the Covid-19 pandemic. Meanwhile, trade with non-EU countries over the same period dropped by just 0.8 percent, which the report said reflects the impact of new border checks on trade with the continent.

However, despite the slump, the bloc as a whole remains the UK's largest trading partner.

Imports from Germany have fallen by a quarter since 2018, dropping to £12.5 billion for the period from January to March 2021. This is especially significant as, with the exception of a six-month period in 2000/01, the EU nation had consistently been the UK's largest import market since records began in 1997.

Meanwhile, imports from China increased by 66 percent from Q1 2018, reaching £16.9 billion in the first quarter of this year.

The ONS said: "Since April 2019, there has been a decline in imports from Germany, which coincides with increased uncertainty around previous EU exit dates and, from quarter one 2020, the impact of the coronavirus pandemic. From quarter two 2020, the UK has imported more from China than it has from Germany."

At the start of 2018, China was only the UK's third-largest import market, with a total value of £10.2 billion, behind the Netherlands (£10.3 billion) and Germany (£17 billion). However, it was the only nation among the UK's top five trade partners to increase its import value over the last three years.

In 2020, imports from China were boosted by demand for textiles products for use in face masks and other personal protective equipment, while electronics imports were also strong. In the first quarter of 2021, clothing and footwear were among the top Chinese imports to the UK as the retail sector continued its recovery from lockdowns.

'Teething problems' set to become long-term issues?

The UK government has attributed many of the difficulties firms have faced in moving goods in and out of the UK since Brexit to 'teething troubles' as importers and exporters get to grips with new rules and paperwork. It has stated that once firms develop a fuller understanding of the necessary regulations involved, it expects trade volumes to recover significantly.

However, some commentators, politicians and industry groups have warned the problems could be far more long-lasting.

For instance, Naomi Smith, chief executive of the pro-EU campaign group Best for Britain, told the Guardian businesses are "struggling to cope with costly red tape imposed on them by the government's last-minute, bare-bones deal with the EU". She added that promises that trade with other countries would make up for any losses have not yet materialized.

Meanwhile, figures from the Office for Budget Responsibility have suggested that the additional trade barriers associated with leaving the EU would reduce the long-term productivity of the UK by around four percent compared with if it had remained a member. 

While it said the full impact of this could take as long as 15 years to be realized, it noted in March that around two-fifths of this slump had already been seen as a result of uncertainty surrounding Brexit.
Trade expert Dr Anna Jerzewska also said in a speech to the North East England Chamber of Commerce recently that conditions are unlikely to improve in the coming months as more elements of the Brexit agreement begin to be enforced.

"It's very difficult to tell [businesses] that things will get better because of all these regulations and the difficulty of moving goods: all that will stay and more will come. So it’s very difficult to give an upside," she said.