How has the pandemic affected international trade across the UK?

In 2020, total UK trade in goods and services fell compared with the previous year. Unusually, exports were higher than imports. It remains to be seen whether these changes reflect short-term Covid-19 disruptions or longer-term supply chain adjustments caused by Brexit.

The pandemic hampered international trade and highlighted vulnerabilities within global supply chains. New experimental data released by the Office for National Statistics (ONS) provide evidence for assessing the impact of Covid-19 on UK trade.

The data, covering the calendar year 2020, include figures for Northern Ireland, Scotland and Wales, and the nine regions of England. Across the UK as a whole, there was a substantial year-on-year fall in total imports and exports from 2019. But there was considerable variation in the size of the decrease among different regions – see Figure 1.

Figure 1: Year-on-year percentage change in value of total trade imports and exports by ITL1 region, 2019 to 2020

Source: ONS
Note: The ‘Unknown’ category includes companies unmatched to specific regions, some offshore oil activity, non-monetary gold, government spending in trade in goods, and national imports of gambling in trade in services. The other 12 are what are known as the International Territorial Level (ITL) 1 statistical regions of the UK.

The West Midlands saw the largest year-on-year fall in total exports, at -25.3%. This decrease, seen in exports of both goods and services, may have been due to the prevalence of car (and car part) manufacturing in the region. The sector struggled significantly in 2020, in part because of a global shortage of semiconductors.

Beyond cars, both the wider manufacturing and accommodation and food service industries saw large decreases in trade during the pandemic. This is likely to have contributed to the shrink in exports seen in the West Midlands.

The East of England experienced the second smallest fall in total exports, at -4.3%. This is likely to be a result of the numerous research institutions related to medicine, pharmaceuticals and biosciences located in the region. Many of these research areas experienced a surge in demand in response to the pandemic. Overall, the professional, scientific and technical activities industry experienced a 22.5% increase in trade compared with 2019.

What happened to the UK’s trade balance?

The UK had a total trade surplus of £6.3 billion in 2020, as all four nations exported more than they imported. This contrasts with the deficit of £27.6 billion the previous year.

London was the main contributor to this, with a balance of £54.2 billion (driven by service exports). A significant proportion of these exports is likely to have come from the financial and insurance services industry. Recent analysis shows that, overall, this sector accounts for around a third of UK service exports, with half of the sector’s output generated in London.

The South East had the highest trade deficit of the regions of England, with £108.6 billion in imports. This is due in part to the presence of the Folkestone and Dover ports, as well as nearby warehousing in the region.

What happened to trade in goods?

All UK nations bar England had surpluses in goods trade in 2020, with the North East being the only region in England that was a net exporter. The South East was the largest importer of goods, accounting for 19.9% of UK goods imports.

Figure 2 shows that the value of goods imported and exported fell in all nations and regions from 2019 to 2020. London experienced the largest percentage decrease in goods imports, primarily due to buying in fewer products from countries outside the European Union (EU).

Figure 2: Year-on-year percentage change in value of trade in goods imports and exports by ITL1 region, 2019 to 2020

Source: ONS

What about trade in services?

The UK had a surplus in services trade of £135.7 billion, up from £103.3 billion in 2019. All nations and regions were net exporters of services. London accounted for 41.1% of imports and 48.5% of exports, trading in services more than any other region.

But imports in services fell in all regions from 2019 to 2020, and exports fell in ten of the 12 regions – see Figure 3. Northern Ireland was one of the two regions that saw an increase in exports, largely due to trade in financial and insurance services.

Figure 3: Year-on-year percentage change in value of trade in services imports and exports by ITL1 region, 2019 to 2020

Source: ONS

In terms of different areas of the economy, the travel industry dropped from being the largest contributor to services imports in 2019 to the fourth largest in 2020. Lockdowns and international travel restrictions caused travel imports to decrease by -71.1% on average across the UK.

Covid-19 restrictions also hurt exports of services in the accommodation and food service sector. Large decreases were seen in London, the West Midlands and the South East, in particular. This was due in part to drops in demand for retail, tourism and entertainment, as well as nationwide controls imposed on social interactions.

The new ONS data show that the pandemic had a significant impact on UK trade. It is difficult to assess the extent to which these patterns reflect short-term trade disruptions or longer-term supply chain adjustments.

The Trade and Cooperation Agreement between the UK and the EU came into effect in January 2021, as the Brexit transition period ended. It is likely that this will lead to further longer-term supply chain adjustments, and changes to UK trade patterns across the nations and regions.