Lack of UK-EU product testing deal costs up to £6.5bn a year, IPPR estimates

British exporters may be missing out on between £3.7bn and £6.5bn in annual EU sales because the UK lacks an agreement with Brussels to avoid duplicate product testing, according to IPPR research reported by The Guardian Economics. The thinktank estimated that the losses have occurred each year since post-Brexit trading arrangements took effect in 2021.

IPPR said the additional administrative expense had prompted many businesses either to stop exporting to the EU or to establish subsidiaries within the bloc. It called on the government to restart negotiations over a mutual recognition agreement, estimating that the forgone trade represented roughly 0.18% of annual national income. That was about three times the benefit the government expects from the CPTPP trade deal, according to the thinktank's comparison.

The proposed agreement would rely on the UK keeping relevant product regulations aligned with those of the EU as they change. Under that arrangement, authorities on both sides would accept each other's product assessments. IPPR argued that this would lower exporters' costs and give them greater certainty, addressing a specific regulatory obstacle to selling goods across the UK-EU border.

Vehicle and parts manufacturers accounted for the largest sector estimate cited in the report, with annual exports potentially between £2.48bn and £3.42bn higher under an agreement. Electronics exports could have been £1.17bn to £1.67bn higher each year, while the estimated annual increase for pharmaceuticals ranged from £740m to £820m, The Guardian Economics reported.

The research comes amid continuing political debate over Britain's trading relationship with the EU. The Starmer administration proposed a single market for goods earlier this year, but EU officials rejected it, saying closer cooperation must respect the bloc's principles rather than selectively adopting its policies. Liberal Democrat leader Ed Davey told his party's conference that he would seek talks on rejoining the single market and customs union if the party took power.

IPPR economist and report co-author Joseph Sassoon said researchers sought to separate the effects of the missing agreement from other potential causes of weaker exports. Tests considered pandemic disruption, global supply-chain changes, Russian sanctions, energy shocks and changing re-export patterns. He said the estimated effect remained substantial and statistically significant.