A manufacturer with a certified production line in the Midlands may tell you Brexit has not really changed their European business. The line is still running, the customers are still there, the approvals still hold. They absorbed the new paperwork, the dual certification costs, the longer lead times at the border, and they carried on.
That answer is accurate and incomplete. They held on because walking away was more expensive than staying. What it does not capture is that the commercial logic of staying weakens every year, and the firms know it.
What five years of data show
My colleagues Oleksandr Shepotylo, Yujie Shi, and I have spent five years tracking UK–EU goods trade at the product level, covering monthly bilateral flows across 100 countries from 2017 to late 2025. Our latest study[1] is the first to examine how supply chain structures shaped the impact of the Trade and Cooperation Agreement.
The headline numbers are large: a 53.8% decline in export product varieties to the EU and a 16.5% fall in export values (meaning that fewer types of products are now being sold by UK firms to the EU). The more important finding is the pattern underneath. Product characteristics explain roughly ten times more variation in trade outcomes than the identity of the trading partner. What a good is matters far more than where it was going.
Where UK and EU firms were tightly integrated through shared production networks, in pharmaceuticals, chemicals and automotive components, trade held up. Firms in these sectors carry sunk costs: certified production lines, specialised logistics, workforces calibrated to European standards. Absorbing the new regulatory burden was a more rational decision than severing the relationship altogether. However, where production networks were shallow, in consumer goods, perishable products and standardised or easily substitutable commodities, product lines exited and have largely not been replaced.
Predictably, this has hit exporter confidence. The BCC’s own Quarterly Economic Survey has seen repeated declines in the proportion of SME exporters increasing their sales, and in 2025, 54% said the current Trade and Cooperation Agreement with the EU is not enabling them to grow, and only 16% said it was[2]. This comes through clearly what businesses tell BCC. As one micro services firm in Northamptonshire said: “Trouble with customs delaying, withholding and charging each shipment has reached a breaking point. Since Brexit, we have struggled with getting things in and out of the country”
Why resilience is not stability
The gap between those two headline figures tells the story. Export varieties fell by more than half, but export values fell by roughly a sixth. Embedded relationships maintained their volume while marginal product lines exited. The firms that held on now carry a larger share of UK-EU trade across fewer product lines, concentrating risk in relationships that are themselves under strain.
Each year, the commercial logic of maintaining cross-border production under two regulatory regimes weakens. Firms qualify alternative suppliers, restructure value chains, or simply stop replacing capital equipment on the UK side. The relationships that survived the initial shock are thinning, and the window in which they can be preserved is narrowing. I flagged this dynamic in my earlier piece for the BCC on supply chain competitiveness,[3] where I argued that adaptive capacity, not stockpiling or reshoring, is what builds long-term resilience. That argument is now running up against a deadline.
What accelerates the thinning is the cost structure. Technical barriers to trade, operating through conformity assessment and dual certification, impose per-product-line costs that bear hardest where UK and EU production are most closely linked. The UK’s decision to shelve mandatory UKCA marking and continue recognising CE marking indefinitely[4] shows where the logic leads: divergence was attempted and abandoned because it proved too costly. Regulatory duplication remains, and it serves neither side.
What to tackle next
The Sanitary and Phytosanitary (SPS) agreement now expected to have been negotiated addresses agri-food, where our data shows import variety losses deepened from 12% under initial light-touch controls to 30% under full enforcement. For that sector, it will matter a great deal.
However, the dominant export friction for many non-agrifood sectors – technical barriers to trade – falls entirely outside its scope. The EU–Switzerland Mutual Recognition Agreement on conformity assessment provides the institutional model: twenty product categories, no duplicate testing, in operation since 2002.[5]
Our companion study finds that mutual recognition provisions increase exports by 9.8% on average, with gains concentrated where cross-border production runs deepest.[6] A coalition including British Chambers of Commerce, Make UK, the Chartered Institute of Export and International Trade and the Confederation of Swedish Enterprise all called for an EU–UK agreement on exactly these terms.[7] The constituency exists on both sides of the Channel.
This is how the Government can support the initiative:
- A sectoral mutual recognition agreement on conformity assessment, targeting the 25 product chapters where UK and EU firms share production networks. Pharmaceuticals, chemicals, automotive components and medical devices are the clearest cases: these are the sectors where firms have absorbed the highest costs to maintain cross-border relationships, and where reducing duplication would yield the largest return.
- Investment support for firms absorbing dual regulatory costs in the mutual dependence sectors. Kaya, Low and Millard estimate that non-tariff barriers have permanently reduced UK business investment by 1.2%.[8] Accelerated capital allowances or enhanced R&D credits for firms maintaining cross-border production in pharmaceuticals, chemicals and automotive components would slow the thinning that our data documents.
- Capacity in the regulators to negotiate and administer these agreements: technical staff, not only in the trade departments. That capacity currently has no budget line, and without it the conformity assessment conversation cannot advance.
- One of the BCC’s key asks is for the Government to commission a longer-term analysis of how UK trade flows have shifted over the past six years. This analysis should weigh the case for building more structured economic relationships, as a way of tackling the deeper, structural problems affecting trade in chemicals and other key sectors
Investment support is within the Treasury’s control and can start now. Conformity assessment requires bilateral negotiation but carries the largest return. Both need a budget line, and the production networks they would preserve are not going to wait.
Further reading
- Jun Du, Beyond resilience: supply chains and the future of UK competitiveness, BCC, November 2025
- Jun Du’s Substack: The Trade Strategist
- BCC: Budget campaign 2026
- BCC: QES Q2 2026
[1]Jun Du, Oleksandr Shepotylo and Yujie Shi, Supply chain lock-in and the selective destruction of EU–UK trade, Aston Business School, 2025. https://www.productivity.ac.uk/research/supply-chain-lock-in-and-the-selective-destruction-of-eu-uk-trade/
[2] BCC Research 2025: https://www.britishchambers.org.uk/news/2025/12/eu-trade-getting-harder/
[3]Jun Du, Beyond resilience: supply chains and the future of UK competitiveness, BCC, November 2025
[4]UK Government, Placing UKCA or CE marked products on the market in Great Britain
[5]EUR-Lex, EU–Switzerland mutual recognition agreement (MRA). The agreement covers twenty product categories and has been in operation since 2002.
[6]Jun Du, Oleksandr Shepotylo and Liangliang Zhang, Streamlining standards: sectoral trade gains from mutual recognition of conformity assessment (MRCA) in a post-Brexit world, Centre for Business Prosperity Insight Paper, Aston University, 2025.
[7] See the BCC’s 2025 EU Reset: A UK Business Manifesto?; Make UK, Chartered Institute of Export and International Trade, Confederation of Swedish Enterprise et al. Trade bodies call for EU-UK mutual recognition of conformity assessment.
[8]Otmane Kaya, Hannah Low and Stephen Millard, Brexit and non-tariff barriers: effects on UK business investment and productivity, The Productivity Institute Working Paper No. 057, 2025. https://www.productivity.ac.uk/research/brexit-and-non-tariff-barriers-effects-on-uk-business-investment-and-productivity/
