UK exports to European Union drop 40% as economy shrinks in January

UK goods exports to the European Union fell 40.7% in January, according to the Office for National Statistics (ONS), while imports tumbled 28.8%.

The figures show the biggest drop since records began in 1997 and are the first since new trading rules between the UK and the EU came into force.

The ONS said temporary factors were likely to be behind much of the falls.

Meanwhile, new data showed the UK economy shrank by 2.9% in January amid the third lockdown. Retailers, restaurants and hairdressers were all affected by the latest Covid-19 lockdown. The economy is 9% smaller than it was before the start of the coronavirus pandemic.

Jonathan Athow from the ONS, said. "Manufacturing also saw its first decline since April with car manufacturing falling significantly. «However, increases in health services from both vaccine rollout and increased testing partially offset the declines in other industries."

Economic activity in health stood out, increasing by 8.7%, mainly through Covid testing and vaccine schemes.

Both imports from and exports to the EU fell "markedly" in January, the ONS said. The value of goods exported from the UK to the EU fell by £5.6bn in January 2021, while imports dropped by £6.6bn.

The ONS said the fall in goods coming into the country were largely seen in machinery and transport equipment, and chemicals from the EU. Car imports, as well as medicinal and pharmaceutical products, were particularly affected.

The ONS said companies may have been using up some trade stock instead of buying new goods in January.

In addition, the end of the temporary trading arrangement between the UK and the EU coincided with the discovery of a new strain of Covid-19 in the UK, which caused further complications and delays, after lorry drivers were required to take tests before crossing the border at the English Channel.

The head of economics at the British Chambers of Commerce, Suren Thiru, said: "The significant slump in UK exports of goods to the EU, particularly compared to non-EU trade, provides an ominous indication of the damage being done to post-Brexit trade with the EU by the current border disruption.

"The practical difficulties faced by businesses on the ground go well beyond just teething problems and with disruption to UK-EU trade flows persisting, trade is likely to be a drag on UK economic growth in the first quarter of 2021."

A government spokesperson said: “A unique combination of factors, including stockpiling last year, Covid lockdowns across Europe, and businesses adjusting to our new trading relationship, made it inevitable that exports to the EU would be lower this January than last.

This data does not reflect the overall EU-UK trading relationship post Brexit and, thanks to the hard work of hauliers and traders, overall freight volumes between the UK and the EU have been back to their normal levels since the start of February”.