Brexit has hit UK trade less than many forecasters predicted thanks to big companies adjusting to red tape at the border, according to research by the London School of Economics.

The researchers estimate that the UK’s global exports and imports will fall by 6.4 and 3.1 percent respectively between 2020 and 2022, compared to the levels predicted for the rest of the EU, according to -analysis of trading data at company level from HM Revenue & Customs for the first time. two years after Brexit.

The report by economists at the LSE’s Center for Economic Performance concluded that while the EU-UK Trade and Cooperation Agreement signed in 2020 “will undoubtedly reduce trade”, the reduction “at least in the short run, will be smaller than expected in forecasters”.

The drop in trade as a result of Brexit amounts to a £27bn hit to exports and £20bn lower imports by 2022, according to the LSE.

However, while the report found that large businesses proved more resilient, smaller companies were hit hard with more than 16,400 businesses ceasing to export to the EU after in 2021.

Thomas Sampson, co-author and associate professor of economics at the LSE, said that while the 6.4 per cent fall in total exports of goods was “insignificant”, it was smaller than many pre-Brexit figures. study predicted.

He added that the TCA has been “a disaster for small exporters”, with many stopping exporting to the EU altogether, but “at the same time, large companies have adapted well to the new trade barriers”.

The LSE’s findings, which are limited to trade in goods, will add to the increasingly contentious debate on the economic impact of Brexit. The impact on UK trade was initially overshadowed by the Covid-19 pandemic, which caused massive disruption to global supply chains, and other methods modeled multiple hits.

Economists at Aston University have estimated Annual exports to the EU are 17 percent lower and imports 23 percent later than if Brexit had not happened, with a negative impact increasing in 2023.

In contrast, the LSE report estimates only a 13.2 percent fall in the value of products exported to the EU as a result of using different modeling techniques and a narrower sample.

Jun Du, an economics professor at Aston University, said in his view that the LSE’s figures were likely to be an underestimate because the analysis focused on companies that were already strong enough to trade with the EU and the rest of the world.

“These companies are the survivors, so if you determine the negative impact of Brexit only from the good companies you get a rosier picture,” he added.

The Office for Budget Responsibility still estimates that Brexit will cause a 4 percent long-term hit to GDP as a result of the effects not only on trade, but also reduced investment and productivity in the UK economy. .

In trade, the OBR’s prophecylast updated in May, so total UK exports and imports of goods and services “will be 15 per cent lower over time”. The OBR declined to comment on the LSE paper.

The LSE said that while there is “early evidence” of companies adjusting to life outside the EU, the effects of Brexit will depend on the long-term impact of the TCA which is “not yet fully realised”.

The business warns of the so-called “Brexit 2.0” effectswith new EU regulations – for example carbon border taxes or new supply chain reporting requirements – leading to trade with the bloc becoming more difficult over time.

However, even allowing for these future effects, the LSE’s Sampson said they should increase the significance for the OBR’s forecast of a 15 per cent long-term hit to imports and export to verify correct.

Sampson added that although large businesses initially adapted better than expected, that does not mean they did not face higher costs and reduced productivity as a result of dealing with new customs procedure.

“Adjustment to new trade barriers creates additional costs for businesses, which tend to show lower productivity,” he added. “There is also a risk to future trade growth, because we know that the big exporters of tomorrow are the small exporters of today, and obviously they are suffering.”

The Cabinet Office said the government has taken a number of steps to help small businesses, including the Export Support Service launched in 2021. “We want to reset the relationship with our friends in Europe, to will tackle barriers to trade and make Brexit work for the British people,” added a spokesman.