5.2 UK trade and Brexit impact

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UK’s overall trade deficit was 1.8% of GDP in 2025 from:
- trade surplus with non-EU countries of 1.4% of GDP;
- trade deficit with the EU of -3.3% of GDP.
UK trade (exports + imports) was £1.9 trillion in 2025 with deficit of £52 billion (real prices):
- surplus on services of £190 billion was offset by a deficit on goods of £242 billion
- UK’s major trade partner is the EU (46%), followed by the US (18%)
- deficit with EU of £93 billion was offset by a non-EU surplus of £41 billion
Within the EU, the Single Market, Customs Union, VAT area and customs cooperation remove most, but not all, trade frictions
- 57.6% of EU trade was with other EU countries (2024)
- only 5.4% of EU trade was with the UK
- however, UK remains an important EU trade partner, ranking third after China and US
TCA might keep tariffs low but creates new non-tariff trade barriers (such as rules of origin and leaving EU VAT area) that create frictions, delays and costs:
- reduce UK-EU trade volumes and profitability
- extra costs for UK government and business, including:
  - one-off cost of installing border infrastructure: £4.7 billion (NAO) + operating costs
  - annual cost of customs declarations: £7.5 billion (HMRC)
  - annual cost to traders of border checks on food and animals: £0.5 billion (HMG)
Significant red tape, costs, delays and supply-chain disruption for SMEs
- 23,000 SMEs stopped trading solely with the EU, 2018 to 2020 (with a further 18,000 SMEs stopping, 2021 to 2025)
Brexit has reduced overall UK trade in goods by about 15% and trade in services by about 11%
Brexit has lowered UK trade with the EU because UK has not participated fully in post-Brexit EU trade growth:
- 12% lower exports (16% lower for goods and 7% for services)
- 16% lower imports (14% lower for goods and 19% for services)
- most of the Brexit impact is due to leaving the single market, not the customs union
Economic costs of Brexit dwarf benefits of UK trade deals with non-EU countries
- annual Brexit cost estimated at ~4% to ~8% of GDP vs distant benefit ~0.44% of GDP from trade deals (HMG estimates)