The scheduled exit from the EU by the UK is set to diminish EU-UK trade relations. However, UK-EU trade relations have cooled well before the 2016 Brexit vote. hanse data show that since prior to the global financial and economic crisis in 2007 the UK has become an increasingly less important trading partner for the EU.
The loss in market share by the UK in EU imports may be indicative of a gradual erosion of the UK’s competitiveness. The UK saw its share in total EU imports decreasing from 5.1 percent in 2007 to 3.8 percent in 2016 or from a total value of US$245 billion to US$166 billion. While Brexit is set to recalibrate UK-EU trade relations, the UK lost in particular market share in the fastest growing and largest EU imports.
The 10 largest chapters, using the HS 2002 classification at 2 digits (98 chapters of goods), increased their share in EU imports between 2007 and 2016 from 62.5 percent to 60.4 percent including 84 nuclear reactors, 87 vehicles, 85 electrical machinery, 27 mineral fuels, 30 pharmaceutical products, 39 plastics, 90 optical, photographic, measuring and other instruments, 29 organic chemicals, 71 precious stones, and 99 Commodities not else specified. In the critical chapter 87 vehicles, the UK’s market share slipped from 5.5 percent in 2007 to 5.0 percent in 2016 while the sector represents in 2016 14 percent of total EU imports from the UK.. The UK saw its share in the 10 largest EU import chapters decline from 5.5 percent in 2007 to 4.4 percent in 2016 while those sectors represent 66.2 percent of total EU imports from the UK.
The 10 fastest growing chapters increased their share in EU imports between 2007 and 2016 from 25.9 percent to 31.5 percent including: 71 precious stones, 88 aircraft, 30 Pharmaceutical products, 90 optical, photographic, measuring and other instruments, 61 apparel and clothing, 64 footwear, 39 plastics, 08 fruit and nuts, 85 electrical machinery, 38 chemical products. The UK saw its share in the 10 fastest growing EU import chapters decline from 5.0 percent in 2007 to 3.4 percent in 2016 while those sectors represent 28.8 percent of total EU imports from the UK.
The UK was able to expand its markets share in 64 footwear among the fastest growing EU import chapters. It increased its market share from 1.6 percent in 2007 to 2.5 percent in 2016. In 64 footwear, the 3 largest markets shares in 2016 were China (23.1 percent), Vietnam (11.8 percent) and Italy (9.3 percent). The 3 fastest growing market shares in 64 footwear were Germany, Vietnam and Indonesia (Figure 1).
The UK expanded its market share in EU imports in chapters that on average are in decline. This may explain the UK’s overall decline as an EU trading partner (Figure 2). The UK maintains the largest market share in a narrow set of chapters including 78 lead, 97 works of art, 49 printed books, 22 beverages, 33 essential oils and resinoids, 75 nickel 99 commodities not specified, 38 chemical products, 37 photographic and cinematographic goods, 34, soap. The UK’s market share in these chapters was 7.3 percent in 2016 while those chapters represent only 6.6 percent of EU imports indicating that the UK maintains relative dominance in a narrow set of trading chapters.
Figure 1. Fast growing market share in EU imports of footwear
Figure 2. UK fastest growing market shares in EU imports
The UK already lost market share in EU prior to the Brexit vote imports between 2007 and 2016. It seems to fail maintaining competitiveness in the most dynamic EU imports. This will diminish significantly the UK’s overall trading position. Footwear shows that the UK can compete in a fast growing sector. If lessons are to be learnt for the UK, the footwear sector may serve as a good reference.