Latest impacts of the EU exit and coronavirus on UK trade in services

The Office for National Statistics (ONS) have produced a report recently showing a noticeable change in UK trade. Much of this is likely to be due to the fall in world trade and disruption to global supply chains. These are a result of the Coronavirus pandemic and global recession.

There may also be some impact from Brexit and related uncertainty; however these are only initial post-transition period estimates. It is too early for any conclusions to be reached about longer term trends or impacts.

Further analysis is awaited as the Pandemic unfolds.

Key points are highlighted below:  

• UK service exports and imports have declined since Quarter 1 (January to March) 2019. Trade with EU countries has fallen more than trade with non-EU countries.
• The share of total service imports from EU countries fell by around 9 percentage points to 37.9% in the two years to Quarter 1 2021. The share of total service exports fell by around 1.3 percentage points to 36.5% over the same period.
• The proportion of businesses citing COVID-19 as a challenge increased in mid-2021 compared to the beginning of 2021 (see chart below). The proportion citing EU exit fell over the same period; this is also reflected in the results of the International Trade in Services Survey. This suggests COVID-19 had a bigger impact on falling trade in services.
• Service types that rely on the movement of people were impacted most by the pandemic. These include travel, transportation, manufacturing, maintenance and repair, and construction.
• Exports of legal, accounting and management services to non-EU countries increased in Quarter 1 2021 when compared with Quarter 1 2019. This was driven by trade with the United States, while exports to the EU fell over the same period.
• EU imports of financial services fell to 25.3% of world total financial services in Quarter 1 2021 compared with Quarter 1 2019. The composition of exports remained stable.

Trade in services with EU countries

Changes to the EU and non-EU composition of exports and imports of services are evident. The composition of exports to EU countries declined by 1.3 percentage points in Quarter 1 (January to March) 2021 to 36.5% of total service exports since Quarter 1 2019. Imports declined by 9 percentage points to 37.9% of total service imports.

COVID-19 appears to have had the greatest impact on reduced level of trade in services. However, the end of the EU transition period brought about important changes to trade regulations governing trade in services between the UK and the EU.

Financial services have seen growth in exports to EU countries of £0.08 billion (1.4%). Imports from EU countries reduced by £0.57 billion (35.2%) in Quarter 1 2021 compared with Quarter 1 2019. This has resulted in a 10.4 percentage point decline in EU composition of the world total of financial services imports to 25.3%.

There are indications of a shift in the contribution of EU and non-EU partner countries to imports of financial services. The non-EU contribution to the world total has increased to 74.7% (10.4 percentage points).

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