Brexit – possible impact on trade in goods
Brexit – possible impact on trade in goods
The United Kingdom is an important member of the European Union, also in terms of foreign trade. Brexit would have important implications for the EU as a whole, but the impact on individual Member States would strongly vary depending on the closeness of their economic ties with the United Kingdom.
On 29 March 2017, the United Kingdom notified the European Council of its intention to leave the European Union (EU) in accordance with Article 50 of the Treaty on the EU. From 29 March 2019 on, the United Kingdom will no longer be a member of the EU. At the end of March, the United Kingdom asked for extension. The new date is 12 April, if the United Kingdom does not support the agreement and 22 May if the British Parliament's agreement is backed up. The method of exit thus depends on whether the United Kingdom will leave the EU with or without a deal.
What could happen if the deal was ratified?
In the case of an exit deal, a transitional period will apply. During the transitional period of 21 months, all EU legislation will continue to apply to the United Kingdom.
What would happen in the case of no deal?
If the deal is not ratified, the United Kingdom will withdraw from the EU without a transitional period and therefore become a third country. From that day on, the EU legislation will cease to apply to the United Kingdom. (Source: Financial Administration of the Republic of Slovenia)
The withdrawal of the United Kingdom from the EU would have repercussions for individuals and businesses in both the United Kingdom and the rest of the EU, including in Slovenia. Among other things, the impact would also be possible on trade in goods.
United Kingdom and trade in goods with the EU
According to Eurostat data for 2018, the United Kingdom was the fifth largest European exporting country (behind Germany, the Netherlands, France and Italy) and the second largest European importing country (behind Germany): exports amounted to EUR 411.3 billion and imports to EUR 570.4 billion. The United Kingdom's trade balance has been negative throughout the last twenty years.
The UK exports to the EU common market amounted to EUR 193.8 billion (or 47.1% of total UK exports) in 2018. The trade balance with the EU Member States has been continuously negative over the past twenty years, and the external trade deficit has exceeded the EUR 100 billion mark in recent years, which makes it the largest trade deficit among EU Member States. In addition to Cyprus, the United Kingdom was the only EU Member State that exported most of the goods to EU non-member countries in 2018: 52.9% of total UK exports were exported to EU non-member countries, most of which to the United States (13.3% of total exports). The other major UK export partners were European countries, namely Germany, France and the Netherlands. In 2018, 23.4% of total UK exports were exported to these three countries.
In 2018, the UK imports from the EU amounted to EUR 301.2 billion (or 52.8% of total UK imports). As with more than half of European countries, Germany was the most important import partner for the United Kingdom (13.6% of the total UK imports). Given the value of total imports, other important partners are the United States (9.7%), China (9.3%) and the Netherlands (8.2%).
From the point of view of Brexit, of course, the most important trade is trade with the EU Member States. In 2018, the United Kingdom exported to the EU Member States most products from the group petroleum oils and oils obtained from bituminous mineral (7.5% of total exports to the EU) and motor cars and other motor vehicles (6.9%). The United Kingdom imported from the EU Member States most products from the group motor cars and other motor vehicles (10.6% of total imports from the EU) and medicaments (4.1%). In 2018, the United Kingdom was the second largest importer (behind Germany) of goods from the group of road vehicles throughout the EU.
Slovenia’s international trade with the United Kingdom
The withdrawal of the United Kingdom from the EU would have significant implications for the EU as a whole, but the impact on individual Member States would strongly vary depending on the closeness of their economic ties with the United Kingdom.
How closely are Slovenia and the United Kingdom connected in terms of trade?
According to provisional data, in 2018 Slovenia exported EUR 577.3 million of goods to the United Kingdom and imported EUR 441.5 million from there. Exports to the United Kingdom represented 1.9% of total Slovenian exports and ranked the UK 13th most important exporting partner of Slovenia. In recent years the share of exports to the United Kingdom has remained approximately the same. In 2018 Slovenia exported to the United Kingdom most products from the group furniture and parts thereof (EUR 53.9 million), followed by electrical machinery and apparatus (EUR 53.4 million) and medicaments (EUR 39.8 million).
Imports from the United Kingdom represented 1.4% of total goods imported to Slovenia in 2018, which makes the UK 20th most important importing country. In recent years the share of imports has remained approximately the same. In 2018 the United Kingdom exported to Slovenia most products from the group petroleum oils and oils obtained from bituminous mineral (EUR 84.9 million), followed by medicaments (EUR 16.7 million) and aluminium (EUR 14.0 million). Slovenia has had a surplus in the trade in goods with the United Kingdom since 2001, which on average amounted to just over EUR 125 million.
For Slovenia the direct impact of the United Kingdom’s exit from the EU would be greatest in trade with products that are mostly exported to that country. In 2018 these products were from the group worn clothing and other worn textile articles (41.8% of total exports to the EU), musical instruments (27.2%) and agricultural machinery (26.2%).
For Slovenia, Brexit is important mainly due to its indirect link with the United Kingdom. As mentioned above, the main EU partners of the United Kingdom for imports of goods are Germany, the Netherlands and France (more than half of UK’s total imports from the EU). Slovenia exported 27.7% of total exports to these countries in 2018; 20.3% of total exports were exported to Germany, our most important trading partner. Among the products imported by the United Kingdom from the above mentioned three countries in 2018, motor cars and other motor vehicles, medicaments, and parts and accessories of the motor vehicles are predominant. To these three countries, Slovenia in 2018 exported the largest number of parts and accessories for motor vehicles (54.6% of total exports from this group), motor cars and other motor vehicles (54.5%) and electrical machinery and apparatus (41.0%).
According to Eurostat data for 2018, Slovenia is one of the EU Member States that are less connected with the United Kingdom in terms of trade. Only Croatia has a smaller share of exports to the United Kingdom (in terms of total exports of the country) than Slovenia. The share of imports (in terms of total imports of the country) from the UK is, together with Luxembourg and Croatia, the lowest in Slovenia. On the other hand, Ireland is heavily dependent on the United Kingdom: 11.3% of total exports and 26.1% of total imports.