Rejoining customs union would not fix damage caused by Brexit, research finds
Brexit has depressed UK exports to the EU by 12%, and rejoining the customs union alone would reverse only a small fraction of the harm, according to new research.
Research shared with the Guardian by economists John Springford and Anton Spisak of the Centre for European Reform (CER) provides fresh evidence of Brexit's lasting damage. A decade after the referendum, UK exports to the EU are 12% lower than they would have been if the UK had stayed in the EU. Services exports are down 7%, and goods exports are 16% lower.
The study finds that the “overwhelming majority” of the export decline – 10 percentage points out of 12% – is due to leaving the single market, not customs barriers. Regulatory costs, such as new certification procedures and compliance checks with EU standards, have had a far greater impact than customs-related hurdles.
Hardest-hit sectors include travel, finance and insurance, chemicals and pharmaceuticals, and agrifood. The estimate of services losses is larger than previous studies because the authors account for a post-pandemic surge in services trade within the EU that the UK has missed.
Politically, the research comes as potential Labour leadership candidates Andy Burnham and Wes Streeting have floated the idea of rejoining the EU. The Liberal Democrats, led by Ed Davey, this week announced they would now campaign for single market membership, not just the customs union.
Springford and Spisak argue that rejoining only the customs union would bring modest benefits. It would eliminate the need for UK firms to comply with complex “rules of origin” to qualify for tariff-free trade, but would do little for services and would prevent the UK from striking its own trade deals with non-EU countries.
To fully recover lost trade, the UK would need to re-enter the single market, which would involve accepting free movement of people, budget contributions, and EU rules without a say in setting them. The authors note that Brexit advocates’ hopes for offsetting EU trade losses with increased non-EU trade have not materialised.
Their findings are consistent with several studies estimating that Brexit has reduced UK GDP by 4% to 8%.
