How Brexit Affects UK-EU Trade for UK Businesses: HMRC Research

HM Revenue & Customs (HMRC) tasked IFF Research to research the trading behaviour of UK businesses whose international goods trade is conducted exclusively with EU countries in the post-Brexit period. Additionally, the IFF Research was tasked to determine the impact of Brexit on trade with EU countries. 

The study was conducted in two phases: a quantitative survey involving 847 businesses, comprising 730 VAT-registered and 117 non-registered companies, and a qualitative phase composed of in-depth interviews with 40 businesses, the majority of which were VAT-registered.

Key Data from the Research

The initial data showed that two-thirds of businesses, including 62% of VAT-registered and 65% of non-registered businesses, considered trade with the EU essential to their operations. Out of all VAT-registered importers, 74%  stated that the primary reason for sourcing goods from the EU was the unavailability of those goods in the UK. Additionally, 39% and 35% of VAT-registered businesses cited quality concerns and the desire for value for money as the primary reasons, respectively. 

Among VAT non-registered businesses, 70% highlighted quality as a key factor, and 53% value as the top motivator for importing goods. When it came to exports, access to a larger market was the most commonly cited reason by both groups. More specifically, 56% of VAT-registered and 81% of VAT non-registered businesses named this as the primary reason for exports.

The research shows that the value of EU trade has remained stable for the majority of VAT-registered businesses, with 61% reporting no change over the past year, while 20% saw an increase and 18% a decrease. Regarding the VAT non-registered businesses, 45% experienced an increase, often linked to customer demand or pre-Brexit stockpiling.

Furthermore, the research indicates that the use of intermediaries in EU trade was more prevalent among VAT non-registered businesses, with 62% of them utilizing intermediaries, compared to VAT-registered businesses, where only 25% required intermediaries. The most common type of intermediaries used or appointed were road hauliers and freight forwarders, favored by both groups for their convenience and expertise in customs procedures.

Conclusion

Throughout the qualitative interviews, many businesses struggled to identify any benefits arising from the UK’s exit from the EU. However, most businesses stated that they would continue trading, even if complete customs procedures and documentation became mandatory for EU trade. The results of research underscore the vital role EU trade plays for many UK businesses, with the majority viewing it as essential to their operations. 

Source: HM Revenue & Customs