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EU-UK deal recognising each other's product testing would have boosted goods exports by between £3.7bn and £6.5bn a year, finds think tank

Automobiles, electronics, and pharmaceuticals would have benefited most

IPPR urges government to prioritise mutual EU recognition agreement, based on dynamic alignment, to end duplicate testing

UK goods exports to the European Union could have been up to £6.5 billion higher each year from 2021 to 2024 if Britain had secured a deal to prevent duplicate product testing after Brexit, according to new analysis by the Institute for Public Policy Research (IPPR).

The think tank estimates that the absence of such a deal may have cost UK exporters between £3.7 billion and £6.5 billion a year in lost revenue since the UK's post-Brexit trading arrangements came into force. At the upper end, this translates to around 0.18 per cent of GDP, more than atenth of a year's expected economic growth, based on current OBR forecasts.

The losses stem from requirements for some British products to undergo additional testing and certification before they can be sold in EU markets.

IPPR argues that a mutual recognition agreement (MRA) predicated on "dynamic alignment” – where the UK keeps relevant product rules in step with the EU – would allow UK and EU authorities to recognise one another's product assessments, reducing costs and uncertainty for exporters and thereby boosting trade.

The estimated losses are concentrated in three industries:

Motor vehicles and their parts exports would have been between £2.48 billion and £3.42 billion higher each year under an MRA, IPPR estimates.

Electronics exports could have been between £1.17 billion and £1.67 billion higher.

Pharmaceuticals would have had an estimated annual uplift of between £0.74 billion and £0.82 billion.

The findings highlight the scale of trade missed out on as a result of post-Brexit regulatory barriers, providing one of the clearest opportunities to reduce friction in UK-EU relations.

IPPR’s new report is the first attempt to causally quantify the impact of losing an MRA after Brexit – isolating its impact from other factors that could also have caused exports to decline. Researchers tested a range of alternative explanations for the decline, including Covid-related disruption, changes in global supply chains, sanctions on Russia, energy market shocks, and shifts in re-export patterns. The estimated impact of not having an MRA remained large and statistically significant throughout.

IPPR is calling on the government to pursue a mutual recognition agreement with the EU to remove costly and unnecessary duplication, with the automotive, electronics, and pharmaceutical industries at the centre of negotiations. It also urges that this be based on “dynamic alignment”, which it says would encompass more goods and be more enduring.

Joseph Sassoon, economist at IPPR and co-author of the report, said:

“Since Britain left the EU, thousands of products that are made and certified in the UK have to be tested and certified by EU bodies before they can be exported.

"Our findings suggest that this has come at a significant cost to UK exporters. Removing duplicate testing requirements could have increased exports by up to £6.5 billion a year while reducing unnecessary costs and delays for businesses.

"At a time when growth is hard to come by, a mutual recognition agreement with the EU would be a practical way to boost trade and support key sectors of the UK economy.”

ENDS

Joseph Sassoon is available for interview

CONTACT

David Wastell, director of news and communications: d.wastell@ippr.org 07921 403651

NOTES TO EDITORS

The IPPR paper, Aligning for growth: The benefits of an EU-UK mutual recognition agreement, by Joseph Sassoon and Holger Breinlich, will be published on September 24 (0001) at http://www.ippr.org/publications/aligning-for-growth-MRA-UK-EU
To test for the decline in goods affected by an MRA, researchers used a gravity model of trade with a triple difference-in-difference design. UK exports to the EU were used as a treatment group, and the rest of the world’s exports to the EU (including intra EU trade) as a control group. Data from 2020 is dropped from the sample due to the exceptional disruption caused by COVID, and re-exports are dropped where possible. A large language model was used to help classify goods according to their testing requirements.