British manufacturers’ share of EU business falls despite global trade boom

Factories in England and Wales are seeing a downward trend in the share of their trade going to the EU, an analysis from the manufacturers’ trade body shows.

Make UK said that between Britain’s divorce from the EU in 2020 and 2022, only Scotland and Northern Ireland increased their share of exports to the EU, leaving the majority of English regions and Wales suffering a decline in the proportion of sales going to the bloc.

Research by the business advisory firm BDO for Make UK indicated that a structural shift in the UK’s trade patterns was hurting factories in north-west England and the West Midlands that had previously forged strong connections with firms inside the single market and customs union.

The study of official data found that the UK’s share of manufacturing exports to the EU had increased slightly in 2022, to 52% from 50% in 2019, but put this down to an increase in tariff-free trade across the land border in Ireland owing to the Northern Ireland protocol and a jump in the value of Scottish oil and gas exports after Russia’s war in Ukraine sent wholesale prices soaring.

“This [rise] was a result of sharp increases in the share of exports to the EU from Northern Ireland and Scotland over the same period, without which the overall UK share of goods exports would also be on a downward trend,” the report said.

“Furthermore, given the share of goods exports to both Asia and Oceania and North America has remained relatively stable at around 16% since 2019, this would indicate that UK manufacturers are looking at opportunities outside their traditional big three markets.”

According to the analysis, London and the south-east and east of England were the only English regions to have experienced an increase in their share of goods to the EU since 2019. The share of goods exported by London and south-east England increased from 49% to 50%, while the east of England’s share rose from 49% to 54%.

Meanwhile, the north-west recorded a drop in its share from 52% to 50%, the West Midlands slipped one percentage point to 45%, and the north-east, which depends heavily on its relationship with northern Europe, suffered a fall from 60% to 57%.

By contrast, in the same period Northern Ireland’s share increased from 59% to almost two-thirds (64%), while Scotland recorded an even sharper increase, from 50% to 59%.

The figures follow separate data from the UN Conference on Trade and Development (Unctad) last month that showed Britain endured the worst exports record of any member of the G7 besides Japan over the last decade.

Unctad said the UK’s goods and services exports had a value of $813bn in 2012 and rose by just 6% to $862.6bn by 2021, compared with the double-digit increases, calculated in US dollars, enjoyed by Canada (10.2%), France (16.1%), Germany (22.7%), Italy (15.9%) and the US (13.8%).

Make UK said the figures for 2022 showed that England’s small and medium-sized factory owners, which face the biggest burden of extra costs from customs checks, needed more government support for exporting to countries outside the EU.

Verity Davidge, director of policy at Make UK, said: “Given the EU remains the most important market for manufacturers, efforts still need to be made to improve the existing agreement with the EU to reduce barriers to trade.

“However, UK trade patterns may be undergoing a gradual shift, with many companies continuing to look for opportunities in other markets. This has significant implications for export support and government policy must reflect this.”