Brexit has hurt small businesses

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BREXIT WAS always going to be a problem. The question was how many ones it would be. Although industries such as financial services have not suffered the disaster that some predicted, it is not hard to find exasperated business owners who complain that leaving the EU resulted in confusing bureaucracy, higher costs and frustrating delays. A wave of new studies quantifies pain.

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A paper from the Center for Economic Performance at the London School of Economics finds that Britain’s departure from the single market at the end of 2020 only led to a temporary drop in its exports to the EU compared to its sales elsewhere. But when they look at ‘trade links’, or the range of products traded with different member states, they see a 30% drop (see left chart). The decline is concentrated in lighter trade flows to less wealthy countries. It looks strangely like the abandonment of small exporters.

Another study, published by the UK in a Changing Europe, a think tank, explores the effects of new barriers on trade that have continued. Faced with higher costs when crossing UK borders with the EU, companies raised their prices. The authors compare products such as fresh pork or tomatoes, which are mostly imported from EU, with products like pineapples, which come from more exotic climates. They find that by September 2021, Brexit had pushed food prices up by 6% compared to the years before December 2019. (A government proposal to reduce food tariffs could help, although removing non-tariff barriers matters more for imports from EU.)

Comparing Britain’s economic performance with that of similar countries suggests a wider problem. Catherine Mann of the Bank of England pointed out that at the end of 2021 consumer prices were about 4% higher than in otherwise comparable economies that did not experience Brexit (see chart on the right) . With the cost of living skyrocketing, a difference of this magnitude really matters.

For more coverage of Brexit issues, visit our Brexit hub

This article appeared in the Great Britain section of the print edition under the headline “Left for account”

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