Trading blows

How should Britain buy and sell in a turbulent world?

Emily Fry
Emily Fry
Sophie Hale
Sophie Hale

Recently the UK has faced tough times in trade, juggling twin shocks of Brexit and Covid. While service exports have stayed strong, goods trade has struggled. With a possible further disruption to goods trade around the corner in the form of universal Trump tariffs, this briefing asks what our economic experience of the first two shocks might teach us about how to handle the next. 

Key findings

  • The value of UK goods exports rose by just 0.3 per cent each year between 2019 and 2023, far below goods export growth across the OECD of 4.2 per cent annually over the same period. In contrast services exports have grown at 7.5 per cent each year, faster than OECD exports which grew 6.1 per cent per year. 
  • The strength of the UK’s ‘other business services’ and ‘insurance and pensions’ means that the UK has increased its market share of OECD total services exports by 0.9 percentage points, compared with France and the USA which lost 0.1 and 1.3 percentage points over the same period. 
  • Two thirds (66 per cent) of all UK services sold abroad were supplied through subsidiaries set up to trade in foreign markets. Some sectors, such as information and communication ramped up this approach after Brexit. 
  • The remote supply of other business services as a share of direct sales (i.e. not through subsidiaries) increased from 68 per cent in 2019 to 82 per cent in 2022. 

Recommendations

  • Defensive strategy on goods trade through EU alignment: prioritise close alignment with EU (which forms half of overall goods trade) on advanced manufacturing standards. 
  • Support trade in regulated sectors: reduce service trade barriers by negotiating mutual recognition agreements for regulated professions such as legal services, and capitalising on opportunities in high-growth markets like India and Singapore. 
  • Negotiate frameworks for digital trade and supply through subsidiaries to ensure these key ‘workarounds’ remain viable. 
Emily Fry
Emily Fry Senior Economist
Sophie Hale
Sophie Hale Principal Economist