Please click on the above map to explore UK trade with all the nations in the world. The interactive chart is courtesy of the ONS and contains a historical breakdown of imports vs exports.
As Britain’s exit from the European Union draws nearer, we thought readers might be interested in exploring our existing trade relationships in more detail, particularly those with the EU and the Commonwealth nations. We provide a few points for consideration below.
Some of the pessimism around the UK’s economic future outside the EU stems from predictions made by the Treasury, the IMF and the OECD during the referendum campaign. These institutions predicted very negative short-term consequences and indeed, longer-term damage to the economy from Brexit, for example that UK GDP would drop in the region of 2.5-9.5% should WTO rules take effect. These are largely based on the ‘gravity model’ of trade which the treasury has deemed ‘best-practice’. The gravity model asserts that the volume of trade between nations is proportional to the size of their economies and inversely proportional to the distance between them; i.e. the larger and closer the trading partner, the greater the volume of trade. One can introduce other influential factors into these calculations such as shared language or historical imperial links, free trade association membership, the presence of adjoining borders or the absence of physically intervening nations (eg Australia and New Zealand). The Treasury based its predictions on the difference between an estimate of trade volume using the gravity model and actual trade between EU nations, using EU averages and attributing any additional trade solely to EU membership. It found that UK trade in goods with the EU as a consequence of membership was 115% higher- for services the figure was 25%.
An Ipsos-Mori poll prior to the referendum showed that most economists agreed with the above assessment: 88% expected a negative impact in 5 years, and 72% anticipated that this would persist 10-20 years after Brexit.
However, it is the Treasury’s use of EU averages, rather than specific UK figures, that has been criticised by organisations such as Economists for Free Trade. They cite the UK’s shrinking share of exports to the EU since the formation of the Eurozone in 1999. Following the referendum result, the think tank Policy Exchange published a report refuting the validity of the gravity model in some depth. You can read this by clicking here and draw your own conclusions.