Industrial strategy revamp needed after UK loses £74 billion worth of goods exports since Brexit

The UK’s global share of goods exports has fallen by around £74 billion in the five years since 2019, with around half of that loss taking place in key sectors identified in the Government’s industrial strategy like cars and pharmaceuticals, according to major new Resolution Foundation research published today (Monday).

Ten years on from the EU referendum, the report Leaving EU behind? examines what lies behind the UK’s poor recent record on trade, and how it can avoid a similarly bad performance over the next decade.

The report notes in the years since the UK formally left the EU with the Trade and Corporation Agreement, the UK’s transition towards a services-dominated economy has accelerated three times as fast as it did in the years before Brexit. Services now account for 59 per cent of all exports – up 11 percentage points since 2019.

However, this is not due to a boom in services – where UK exports have grown roughly in line with the G7 – but instead a deterioration across goods exports.  The UK’s share of global goods exports fell by around a fifth between 2019 and 2024 – a shortfall of roughly £74 billion.

The scale of the UK’s deterioration compared to other advanced economies is uniquely bad, say the authors, and has been driven by Brexit rather than other recent economic shocks like high energy prices and China’s export push. Other countries that have faced these latter shocks have not seen the kind of exports downturn that Britain has experienced.

Worryingly, the report notes that almost half (49 per cent) of the UK’s recent poor performance in goods exports have taken place across the eight key sectors identified as priorities in the Government’s industrial strategy. The losses of export competitiveness in sectors like cars and pharmaceuticals is especially worrying given the UK’s historic strengths in these areas.

The scale of the ‘slow puncture’ Brexit has delivered to Britain’s exports means that the Government should revamp its industrial strategy and ensure that the UK’s export performance in key sectors over the next ten years is far better than it has been over the past ten.

The report says Britain needs to sharpen its trade game by leveraging the strengths of its powerhouse services exports while doing more to rescue a smaller number of goods sectors.

At present, the eight sectors in the current industrial strategy account for two-thirds of all goods trade, highlighting a failure to prioritise. Instead, the Government should focus on a small number of critical, high-value sectors like aero-engineering, pharmaceuticals and medicines where the UK still has a competitive advantage.

The Government should also look at where and why the UK’s export position has weakened since Brexit – notably in sectors where investment is footloose and where production runs through complex global supply chains – and use its trade strategy to address these barriers. For sectors like chemicals and cars this should mean far deeper dynamic alignment with the EU to smooth supply chains and stop UK manufacturers from being frozen out of them.

Finally, if closer alignment to protect these sectors requires a breach of the Government’s ‘red lines’ over Brexit, Ministers should be clear with the public about the economic cost of these ‘red lines’, and whether they are worth the loss of competitiveness and jobs that they are causing.

Sophie Hale, Research Director at the Resolution Foundation, said:

“The tenth anniversary of the EU referendum offers a timely opportunity to assess Britain’s post-Brexit trade performance. The prognosis is not good. The UK has lost around a fifth of its share of goods exports, a far worse performance than any of our competitors, with firms missing out on £74 billion worth of trade.

“But rather than relitigating the past, we should focus on securing a better future for these damaged sectors of our economy. The Government should revamp its industrial strategy and sharpen its focus on the sectors that retain strengths like pharmaceuticals and aero-engineering.

“Securing better export opportunities in these sectors is going to require closer alignment with the EU to bring British firms back into complex supply chains. Taking this hard-headed approach will require careful negotiation. But the benefits for firms, jobs and the wider economy will make those hard yards worth the effort.”