Britain is one of the most open large economies in the world, with trade worth well over half its national output. The pattern of what it buys and sells is distinctive and explains a good deal of British economic policy.
Goods down, services up
The defining feature of British trade is a split:
- A persistent deficit in goods. Britain imports substantially more physical product than it exports — cars, machinery, electronics, clothing, food, fuel.
- A large surplus in services. Britain is one of the world’s two largest exporters of services, and this has been true for decades.
The services surplus comes from finance and insurance, legal and accountancy work, management consultancy, advertising, architecture, higher education — international students are counted as an export — and the creative industries. It offsets much, though not all, of the goods deficit.
Who Britain trades with
The European Union collectively remains the largest trading partner by a wide margin, taking roughly 40-45% of exports and supplying rather more of imports. Geography largely accounts for this: trade falls sharply with distance, and Britain’s neighbours are its natural market.
The United States is the largest single-country partner, and is unusual in being a market where Britain runs a surplus.
China, Germany, the Netherlands, France and Ireland make up most of the rest of the top tier.
What Britain sells
- Cars and vehicle parts, machinery, aircraft components and engines.
- Pharmaceuticals and medical products.
- Crude oil and refined fuels.
- Scotch whisky — consistently one of the largest single food and drink exports, worth several billion pounds a year.
- Financial and professional services, education, television and music.
Since Brexit
Leaving the EU customs union and single market reintroduced customs declarations, rules-of-origin paperwork and sanitary checks on goods crossing to and from the EU. The effects have fallen unevenly:
- Small exporters have been hit hardest, with paperwork costs that large firms absorb more easily. Many simply stopped exporting to the EU.
- Food and fresh produce — shellfish, meat and dairy — faced particular difficulty, since checks add delay to perishable goods.
- Services, which were never covered by the single market as completely as goods, were less directly affected, though financial services lost passporting rights and some activity moved to Dublin, Frankfurt and Amsterdam.
Britain has since signed trade agreements of its own, including with Australia, New Zealand and Japan, and joined the CPTPP Pacific trade bloc. The independent Office for Budget Responsibility’s assessment is that these gains are small relative to the increase in friction with the EU, a conclusion that is politically contested and economically mainstream.
The Commonwealth question
A recurring argument holds that Britain should trade more with the Commonwealth. The obstacle is arithmetic rather than sentiment: the Commonwealth accounts for under 10% of British trade, and shared history does not overcome the effect of distance on the cost of moving goods.