We ask why the Trade and Cooperation Agreement’s (TCA) impact on UK–EU goods trade has varied so widely across products and trading partners, and what this tells policymakers about where the next phase of the UK–EU relationship reset should focus.
This is the fourth study in a research programme tracking the TCA’s effects, and the first to examine the role of bilateral supply chain structure with nearly five years of post-TCA data. Using monthly bilateral trade data from 100 countries at Harmonised System (HS) 6-digit product level (January 2017 to October 2025) and synthetic difference-in-differences methods, we estimate a 53.8% decline in UK export product varieties to the EU and a 31.5% decline in import varieties relative to their counterfactual levels, while export values fell by an estimated 16.5% and import values by 23.1%.
In value terms, the estimated effects have stabilised — export values fell by 17% at three years and 16.5% at five, import values by 23% and 23.1% (Du, Liu, Shepotylo and Shi 2024) — but negative effects on product varieties continue to deepen through 2025, with no sign of recovery. These aggregate estimates, however, mask wide variation across sectors: some product categories have lost the majority of their trade relationships while others have barely been affected. Explaining that variation is this paper’s central contribution.
An in-depth, two-stage analysis of the estimated effects across 2,673 country-product cells shows that, on the export side, product characteristics explain 37% of the variation in value effects while country identity explains just 3%. We are the first to connect this variation to cross-border supply chain linkages.
Where UK and EU firms were tightly integrated through shared production networks, trade held up: pharmaceuticals, chemicals, and automotive components all show significantly stronger estimated effects where bilateral input-output linkages are deeper, consistent with the logic of relationship-specific investment. These firms had sunk costs in the bilateral relationship that made absorbing the new regulatory burden more rational than severing it.
The gap between the variety and value estimates supports this reading: export varieties fell by more than half, but export values fell by only 16.5%, consistent with embedded relationships maintaining their volume while marginal product lines exited. Where those ties did not exist, in sectors characterised by high consumer-goods orientation, perishability, and low product differentiation, product lines exited and have largely not been replaced.
Among the non-tariff measures tested, technical barriers to trade (TBT) emerge as the dominant policy friction for exports, statistically significant where sanitary and phytosanitary (SPS) measures are not. TBT now operates through the cost of conformity assessment across a regulatory border: UK exporters must demonstrate compliance with EU standards through EU-notified bodies, a process that was automatic under membership but now requires separate certification. The UK government’s decision to shelve mandatory UK Conformity Assessed (UKCA) marking and continue recognising CE marking indefinitely underscores the cost that full regulatory separation imposes.
On the import side, the staggered implementation of UK border controls provides independent confirmation of the regulatory friction mechanism: estimated import variety losses deepened from 12% under initial light-touch controls to 30% under full enforcement, tracking the phasing-in of physical checks.
The findings have implications for the next phase of the UK–EU reset. The SPS agreement negotiated at the May 2025 Summit addresses a real friction channel on the import side. But the dominant export friction, TBT, falls entirely outside that agreement’s scope. The 25 HS2 product chapters where UK and EU production networks are most deeply intertwined, including pharmaceuticals, chemicals, medical devices, and beverages, are where both sides face the highest costs from further regulatory divergence and where both have the strongest economic incentive to cooperate. The EU–Switzerland Mutual Recognition Agreement on conformity assessment, covering twenty product categories since 2002, provides a tested institutional model.
In parallel, simplifying cumulation under rules of origin (RoO), which governs whether inputs sourced from the trading partner count toward meeting origin thresholds, would lower the entry barriers that help explaining why so few new trade relationships have formed in five years. A natural sequencing follows from these findings: begin with what the UK can do unilaterally on origin rules, then use the SPS momentum to open a conformity assessment conversation focused on the mutual dependence sectors.
Authors Jun Du, Oleksandr Shepotylo, Yujie Shi