The year in Brexit: How is the UK progressing on new deals?

Brexit | | MIC Customs Solutions |

How have the UK's FTA efforts and its trading relationship with the EU been developing over the last 12 months?

The last 12 months may have offered the biggest test yet for the UK's trade policy following its exit from the European Union (EU). While the country officially left the bloc on 31st January 2020, and the transition period expired on 1st January 2021, the ongoing impact of the Covid-19 pandemic and its related economic effects acted as a dampener on trade worldwide, making it difficult to gain a clear picture of the impact of Brexit.

But with global trade recovering from these shocks in 2022 - albeit with some headwinds caused by issues such as high inflation and the war in Ukraine - the last 12 months have provided greater insight into how much of the initial issues may have been teething troubles and where any ongoing problems may lie. 

The last year has also seen the UK step up its efforts to strike new trade deals to replace those lost from Brexit. So how has trade been progressing over the last 12 months, and what could 2023 hold for the relationship between the UK and the EU?

Progress on FTAs 'slower than expected'

One area that has been a key focus for the UK government since leaving the single market has been signing new free trade agreements with partners around the world. However, recent figures suggest progress on this front has so far been disappointing.

The BBC reports that in its 2019 election manifesto, the Conservative party pledged to secure agreements covering 80 percent of UK trade by the end of 2022. However, the latest figures suggest that the actual figure will only be 63 percent.

A source at the Department for International Trade suggested the failure to strike a deal with the US has been a major contributor to this. However, the government also missed a target of 12th November to finalize a deal with India, while FTAs with Japan and Australia have been criticized for failing to meet expectations.

The source told the news provider: "We've set our sights high but recognize that to meet this ambition we need a deal with the US, and it is clear the Biden Administration is not prioritizing negotiating trade deals with other countries."

International trade secretary Kemi Badenoch has also acknowledged that the UK "should be doing better" on trade, though she told a Commons committee recently that the full impact of post-Brexit trade arrangement and FTAs is yet to be seen.

Businesses warn EU agreement 'not delivering'

Elsewhere, trade with the 27 nations of the EU also continues to prove challenging. For instance, one recent survey by the British Chambers of Commerce (BCC) revealed 77 percent of firms covered by the UK's Trade and Cooperation Agreement (TCA) with the EU say the deal is not helping them boost sales or grow their business.

It also found more than half of companies (56 percent) have faced difficulties adapting to new trade rules for goods. What's more, four out of five respondents (80 percent) had seen the cost of importing increase since Brexit, while 53 percent have seen their sales margins decrease and almost three quarters of manufacturers experienced shortages of goods and services.     

Director general of the BCC Shevaun Haviland said: "Businesses feel they are banging their heads against a brick wall as nothing has been done to help them, almost two years after the TCA was first agreed. The longer the current problems go unchecked, the more EU traders go elsewhere, and the more damage is done."

She added that there are clearly structural problems with the TCA that must be addressed before the agreement is up for review in 2026.

Separate data from HM Revenue and Customs (HMRC) also appears to back this up, with it showing the number of UK firms classed as exporters fell from 149,443 in 2020 to 126,812 in 2021.

Hopes for Northern Ireland progress in 2023

Despite the gloomy outlook from traders, there is hope that some of the biggest difficulties with Brexit may be on the road to resolution.

One of the most significant roadblocks has been the Northern Ireland Protocol that governs the country's relationship with the rest of the UK and the EU. The separate trading rules for Northern Ireland have proven to be both a political and economic challenge over the past couple of years, with the dispute one of the key factors holding back negotiations on improved trading arrangements with the EU.

However, in a pre-Christmas call, both UK prime minister Rishi Sunak and European Commission president Ursula von der Leyen pledged to work together to find a solution that works for both sides.

Recently, Germany's ambassador to the UK Miguel Berger said that while challenges remain, the fact that the mood has become more positive in recent months makes him "cautiously optimistic" there is a deal to be done.

Both sides agree that checks on goods moving from Great Britain to Northern Ireland need to be reduced, and recent figures from HMRC may help smooth the process. The Guardian reported that 85 percent of goods brought to Northern Ireland from Great Britain remain in the region, which could ease concerns in Brussels about the impact of cross-border trade.