Dependence on EU exports increases for post-Brexit UK

Published by Make UK and BDO, the Annual Regional Manufacturing Outlook reveals how the EU remains overwhelmingly the largest export destination for UK manufacturers. Data from 2021 – the first year in the post-transition period - shows that 49 per cent of exports from the UK went to the bloc. Wales, the North East, East Midlands and East of England, South West, Scotland and Northern Ireland all saw their share of manufacturing exports to the EU increase while Yorkshire & Humber stayed the same. 

“Despite the talk of ‘Global Britain’ history shows that geography is always the main determinant of trade,” said Verity Davidge, director of Policy at Make UK.

“The EU was always going to remain the main destination for manufacturers who appear to becoming more, not less, dependent on it as a market. As a result, it is vital the government now takes steps to reset the trading relationship with the bloc and, wherever possible, eases and simplifies trading to boost exports for SMEs in particular.”

In light of the continued dependence on EU export markets for UK manufacturers, industry is calling on the government and the new prime minister to reset the relationship with the EU, as well as provide additional support for manufacturers, particularly SMES. Actions urged by the authors of the report include:

1. Taking immediate steps to come to a mutual understanding with the EU on the Northern Ireland Protocol which avoids significant shocks to trade with the EU and provides a clear and stable business environment
2. Easing the friction around the CA/CE marking regime by allowing CE marketed goods to be continually recognised on the GB market for as long as the rules in the UK have not diverged and remain the same
3. Re-establish the SME Brexit Support Fund and other targeted schemes that will enable firms to respond to new market regulations in GB and other changes to trade with EU that will come into effect in 2023. In a recent Make UK survey almost a quarter (22 per cent) of manufacturers cited support for exports as one of the top three ways government could help them grow their business.

“Manufacturing businesses have done a good job in adapting to new post-Brexit rules for trading with the EU, but ongoing government support may well be required, particularly for firms at the smaller end of the spectrum,” said Richard Austin, head of Manufacturing at BDO.

“Clearly, there are difficult ongoing political issues relating to the Northern Ireland Protocol. However, it’s vitally important that good trading relationships with our European neighbours are maintained to ensure that trade remains as frictionless as possible. We also hope to see further progress on free trade deals which could offer new and exciting opportunities for the UK’s manufacturing exporters.”

While every region saw positive growth, the report also highlights the challenges from disrupted supply chains with eight out of ten regions reporting orders exceeding output over the twelve-month period. The North East was the best performer for output growth, while the South East led the way for investment intentions, Yorkshire & Humber for output growth, and the South West saw the best levels of job growth.