UK Trade: January 2021 - 40% Fall In Exports To the EU

12th March 2021

Exports of goods, excluding non-monetary gold and other precious metals, fell by £5.3 billion (19.3%) in January 2021, because of a £5.6 billion (40.7%) fall in exports to the EU.

Imports of goods, excluding non-monetary gold and other precious metals, fell by £8.9 billion (21.6%) in January 2021, driven by a £6.6 billion (28.8%) fall in imports from the EU.

Falling imports of goods, excluding non-monetary gold and other precious metals, were largely seen in machinery and transport equipment, and chemicals from the EU in January 2021, particularly in imports of cars and medicinal and pharmaceutical products.

In both current price and chained volume measures, the January 2021 monthly fall in goods imports and exports are the largest monthly falls since records began in January 1997.

Total imports of goods from non-EU countries, excluding non-monetary gold and other precious metals, fell by £2.4 billion (12.7%) in January 2021 while exports increased by £0.2 billion (1.7%).

The total trade deficit for January 2021, excluding non-monetary gold and other precious metals, narrowed by £3.7 billion to £1.9 billion; imports decreased by £9.2 billion (17.6%) and exports decreased by £5.5 billion (11.8%).

The total trade deficit, excluding non-monetary gold and other precious metals, widened by £6.7 billion to £12.8 billion in the three months to January 2021; imports increased by £2.4 billion (1.7%), while exports decreased by £4.3 billion (3.1%).

Main monthly trends

Falling imports of goods in January 2021 were driven by a £6.6 billion (28.8%) fall in imports from the EU (Table 1; Figure 1). Total imports of goods, excluding non-monetary gold and other precious metals, fell by £8.9 billion (21.6%) in January 2021. Falling exports of goods in January 2021 is because of a £5.6 billion (40.7%) fall in exports to the EU (Table 1; Figure 1). Total exports of goods fell by £5.3 billion (19.3%) in January 2021.

In both current price and chained volume measures, these falls in imports and exports are the largest monthly falls since records began in January 1997. In comparison, exports to non-EU countries increased by £0.2 billion (1.7%) over the same period.

The trade in services surplus widened by £0.1 billion to £8.2 billion in the month of January. Imports fell £0.3 billion (2.4%) to £10.7 billion and exports fell £0.2 billion (0.9%) to £18.9 billion.

Monthly trade analysis

Falling imports of goods were largely seen in machinery and transport equipment, and chemicals from the EU in January 2021. Total imports of machinery and transport equipment fell by £3.3 billion (21.9%) in January 2021, driven by a £2.6 billion (30.0%) fall in imports from the EU (Figure 2). The falls in imports of machinery and transport equipment from the EU were driven by a £1.0 billion (39.0%) fall in imports of cars.

Multiple factors may have contributed to this decrease in imports of cars in January, including:

disruption in the lead up to the end of the UK-EU transition period

stockpiling in the lead up to the end of the UK-EU transition period

the ongoing impact of the pandemic including reduced demand associated with the national lockdown in the UK

global supply chain issues

The decline in exports of cars is likely also linked to a fall in demand and reduced car manufacturing. Car manufacturing for export markets fell by 29.1% in January 2021 compared with January 2020, representing the 17th month of decline in UK outputs. This reduction in manufacturing, because of the reduction in demand, had a knock-on effect for the export of cars. Exports decreased by £0.2 billion in January 2021 as 80.6% of cars built in the UK were for the export market, down from 82.7% in January 2020. The decrease in exports of cars to EU countries has been affected most, particularly exports to Germany, Belgium and the Netherlands. This may be associated with lockdown measures in place in these countries tightening at the end of December in response to the risk of the spread of new COVID variants.

Imports and exports of chemicals fell by £1.7 billion (30.1%) and £1.2 billion (25.2%) respectively in January 2021 (Figure 2). The largest falls in imports and exports were observed in medicinal and pharmaceutical products traded with EU countries, which reduced by £1.1 billion (57.3%) and £0.6 billion (62.6%). Imports from the Netherlands, Germany and Belgium accounted for 76.2% of the UK's total decrease in imports of chemicals in January 2021.

The decrease in exports of pharmaceutical products to EU countries is likely a consequence of stockpiling in preparation for the end of the EU transition period by the UK's largest medicinal and pharmaceutical product export partners. Most notably UK exports of medicinal and pharmaceutical products to Ireland increased by 224% in the three months to December 2020 and increased by 283% compared with the same period in 2019. This coupled with reported difficulties for EU countries accessing the primarily UK produced AstraZeneca vaccine may have led to this reduction in exports to the EU.

In contrast to the falling exports to the EU, exports of medicines and pharmaceutical products to non-EU countries increased by £0.3 billion in January 2021. A large proportion of this is represented by increasing exports to China and Japan in this period. This increase is potentially an early effect of the UK-Singapore trade agreement, which came into effect on 1 January 2021. This trade agreement provides lower non-tariff barriers for the trade of pharmaceuticals and medical devices; it may serve to facilitate increasing trade with the UK's largest trading partners in the region, China and Japan.

Imports of miscellaneous manufactures, which includes clothing, fell by £1.9 billion (28.3%) in January 2021. Imports of clothing from non-EU countries fell by £0.2 billion (34.8%) to £0.8 billion: the same value as seen at the beginning of the coronavirus (COVID-19) pandemic in April 2020. This reduction is because of a drop in imports of clothing from China in January 2021, which is likely due to a drop in UK retail sales of clothing because of the national lockdown in place in response to rising COVID-19 cases, coupled with stockpiling of clothing from towards the end of 2020. This is supported by the Business insights and impacts on the economy (BICS) data, which show how in early October 14.4% of wholesale and retail trade businesses had stock levels higher than normal, increasing to 22.1% by mid-December 2020.

Exports of food and live animals to the EU, which includes seafood and fish, have decreased by £0.7 billion (63.6%) in January 2021. This is potentially because of stricter checks and certifications implemented by the EU at the end of the transition period. The Scottish Seafood Association says exports to the EU are being hit by "red tape" delays between Scotland and France. The consignment sign off is reportedly taking six times longer, and previously overnight transit of goods to France is reportedly now taking three days.

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