£24bn Brexit rebound: UK goods imports from EU overtake non-EU trade while Russian influx soars
Goods imports from the EU rebounded fat the start of 2022, despite uncertainty over changes in HMRC methodology, to overtake Non-EU countries, after non-EU imports of goods to the UK surpassed those from the EU for the first time in 2021 since the ONS started recording the data in 1997.
Over £24bn worth of goods were imported from the EU in January 2022, £0.6 billion higher than non-EU countries, with HMRC saying this morning they were “confident that the strong rise in imports from the EU this month is predominantly the result of genuine increases in trade.”
Meanwhile, goods imports from Russia surged to their highest ever monthly level in January but that is expected to plummet in February as Western sanctions imposed on the country following its invasion of Ukraine halt trading with the UK.
Commenting on the January trade figures, Jack Sirett , head of dealing at Ebury, told City PM that “the UK’s trading patterns in 2022 are likely to be determined by two major geo-political events as the ongoing implementation of the Brexit agreement takes effect, while the Russian invasion of Ukraine will also have major ramifications on the imports of goods.”
Sirett added that “the impact of the end of the Brexit transition period fed through in 2021 with imports dropping below non-EU levels for the first time ever and China replacing Germany as the UK’s top trade partner for imports.”
However, the global cost of shipping crisis could be seeing manufacturers in the UK look closer to home for imported goods to lower costs particularly as they get to grips with the new import regulations.
“This looks to have fed through at the start of 2022 with imports from the EU rebounding to overtake those from outside the trading bloc for the first time in a year, albeit caveated by HMRC’s changes in methodology.”
Neighbours
The UK’s closest neighbours may also become increasingly attractive import partners in light of Russia’s conflict in Ukraine and its strengthening ties with China.
In addition, “goods imports from India also reached their highest ever level in 2021 and saw another strong month in January,” Sirett pointed out.
With bilateral FTA negotiations progressing, this is likely to be an area to watch over the next few years with the UK government promising a deal that will deepen economic ties with a fast-growing economy and help UK manufacturers access cheaper parts for their products.
Meanwhile, “trade figures with Russia could be startling in February and then March as the true extent of sanctions imposed and strengthened by the UK and its western allies kick in, most noticeably the phasing out of oil and oil products announced this week.”
“However, in January over £2.6bn worth of goods were imported from Russia – the highest figure on record – with fuels the main commodity imported to the UK,” Sirett concluded.