Leaving EU behind - How Britain lost its trading edge and whether Brexit is to blame

24th June 2026

In the five years since 2019, the period in which Britain formally left the EU, UK exports have tilted from goods towards services about three times faster than before. Worryingly, this reflects weakness in goods – with the UK experiencing the largest fall in goods exports in the G7 – rather than strength in services.

Had Britain merely held its 2019 global market share in goods, exports would have been £74 billion higher in 2024. Neither Britain’s high energy prices nor its exposure to China’s latest export push can explain this – Brexit seems to have played a key role.

Of particular concern for the Government is that half of the £74 billion in ‘lost’ goods exports sits within the eight priority sectors of its 2025 industrial strategy. Turning the tide on trade and salvaging the industrial strategy requires urgent action. The industrial strategy must be triaged, and the EU relationship repaired through negotiated, supervised regulatory alignment. If this is ruled out by the Government’s current red lines on the EU relationship, it should be clear with the public about their economic costs.

Key findings
UK trade has shifted from goods to services about three times faster since 2019 than in the 17 years before – but this reflects weakness in goods weakness, not strength in services. Services now account for 59 per cent of UK exports, up 11 percentage points since 2019. The value of UK goods exports fell by around £10 billion even as world goods exports grew by a quarter.

The UK’s goods decline is uniquely severe and broad-based. Since 2019, the UK has seen the largest fall in goods export volumes in the G7, and its share of world exports fell in three-quarters of the 780 goods products covered. Had it held its 2019 world share, goods exports would have been around £74 billion higher in 2024, a 20 per cent uplift.

Neither high energy prices nor a ‘China shock 2.0’ can explain it. Across 29 rich economies there is no strong link between energy-price shocks and goods export performance, and the UK began the period with the least China-exposed export mix in the G7. After accounting for both, the UK still has the largest unexplained shortfall of any advanced economy in the sample.

Brexit is the most plausible explanation. UK goods exports tracked G7 peers closely until the TCA took effect in January 2021, then began to underperform. The losses span both EU and non-EU markets — and fall fastest outside the EU — pointing to the impact of disrupted supply chains and less investment rather than direct lost EU access.

Weakness in goods has hit the Government’s industrial strategy. Almost half (49 per cent) of the £74 billion goods gap sits in products tagged to the eight priority sectors. In 16 illustrative priority products, the UK lost a third of its world market share in five years – the largest proportional fall in the G7 – with the ground going to China, East and South-East Asia and the US, rather than to Europe.

Recommendations
Be honest about the industrial strategy’s starting point. The strategy backs the right sectors – where global demand is growing and Britain retains genuine strengths – but in most of them the UK’s advantage is eroding rather than compounding. The policy effort needed to defend, let alone grow, market share is far greater than the currently acknowledged.

Triage the industrial strategy. Eight sectors covering nearly two-thirds of goods trade cannot all be priorities. Defend world-leading positions (such as aero-engines), contest hard where advantage is slipping but not gone (such as medicines), and be realistic where the prize is securing a niche rather than recovering share (such as electronic microcircuits).

Repair the EU relationship. Using the Sanitary and Phytosanitary (SPS) agreement as a blueprint, start by extending negotiated, supervised alignment to chemicals, machinery and vehicles. If the EU does accept this without movement on free movement and budget contributions, the Government should reconsider its current red lines on the EU relationship. If it doesn’t, it must be honest with the public about the economic costs of the status quo.

Read the full report HERE
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