The UK’s approach to trade since it left the European Union lacks substantial objectives beyond signing as many free trade agreements (FTAs) as possible, and has now hit a dead end, according to new research from The Economy 2030 Inquiry.

The Inquiry is a three-year project by the Resolution Foundation, a think tank, and the Centre for Economic Performance at the London School of Economics. Funded by the Nuffield Foundation, a charitable trust, it seeks to explore the nature of economic change in the UK.

Trading Up, the project’s latest report, calls for the UK government to implement a “far more ambitious” strategy to protect high-value manufacturing and capitalise on the country’s strengths in services exports.

“For the first time in half a century Britain needs a trade strategy, but it does not have one,” says Sophie Hale, principal economist at the Resolution Foundation. “The recent focus on signing free trade agreements to limit the loss of post-Brexit market access has been successful, but has now run out of road, with no prospect of further significant agreements.”

Since leaving the EU, the UK has signed deals with 73 countries plus the EU, covering around 60% of its total trade. While many of these were so-called rollover agreements – copying the terms of pacts the UK previously had when it was an EU member – it has also achieved deals from scratch with Australia and New Zealand, as well as an agreement in principle to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

But there’s little scope for further trade liberalisation, given that deals with the US and China, which jointly account for 24% of UK trade, are not on the table.

What’s more, the report finds that the deals signed have not been sufficient to prevent a “worrying” decline in the volume of UK goods exports, which are 17% below pre-Brexit levels.

In particular, it calls out the hit to UK high-value manufacturing trade from the UK-EU Trade and Co-operation Agreement. “At the end of 2022, exports such as cars and chemicals were respectively 11% below and just 2% above pre-Brexit levels,” the report says. It adds that this is an underperformance compared to the rest of the G7, where car and chemicals exports were on average 4% below and 25% above the level at the start of that period.

A new UK trade strategy is therefore needed, say the authors, with a defensive focus on goods and an innovative approach to promoting services exports.

“A new strategy must recognise the nature of the UK economy, developments in global trade patterns, and rising geopolitical tensions regarding goods trade in particular,” says Hale. “That requires a twin-track approach, protecting important high-value manufacturing sectors, from cars to chemicals, struggling to retain their place in European supply chains, while focusing on new markets for its world-leading services firms.”

On the goods side, the report says the ultimate objective should be to replicate for the UK the position of Northern Ireland – delivering the benefits of both the EU customs territory and single market for goods – with a UK Protocol. The authors calculate this could boost GDP by as much as 2%, or more than 12 times the projected increase from acceding to the CPTPP. While acknowledging that this would be “politically controversial” in both the UK and Brussels, the report’s authors say they believe it is “not unimaginable”.

Meanwhile, for services, the report recommends new types of services trade agreements (STAs) covering sectors such as finance, business services, education and culture.

“STAs should differ from traditional FTAs in both the issues they cover and the way they are negotiated. The content should focus on mobility of workers, mutual recognition of qualifications and digital agreements, rather than tariffs. Negotiations should also be led by regulatory authorities, rather than trade negotiators,” the report says.

If achieved, the prize for negotiating STAs could be significant, with the report’s authors estimating that removing barriers to services trade could boost the UK’s services exports by as much as 40%, equivalent to additional exports worth £6bn for business services alone if achieved with higher income countries with which the UK already has an FTA, including Australia, Canada, Switzerland and Japan. If an STA could be reached with the US, this figure could climb to as much as £17bn, the report says.

“Successfully riding the wave of growing services exports could be transformative in the decade ahead. Maintaining the UK’s current market share as global services exports thrive, compared to the modelled post-Brexit path, could ultimately boost exports by up to £200bn by 2035,” the authors add.

Speaking to GTR in response to the report, a Department of Business and Trade spokesperson highlights government efforts underway to achieve these aims.

“The UK is a global services superpower – top of the G7 for services exports in 2022, reaching record highs totalling almost £400bn,” they say. “We are negotiating innovative new services-focused deals with Israel, Switzerland and the Gulf Co-operation Council. The government continues to look at ways to strengthen trade with the EU, but our recent agreement to join the CPTPP will not only boost trade, it also positions the UK alongside some of the fastest growing economies in the world, offering massive potential for UK companies.”

The spokesperson also challenges the report’s assertion that the UK lacks a trade strategy. “Our approach to trade is detailed in our outcome delivery plan and the Integrated Review Refresh, which shapes how we deliver our objectives,” they say.

Nonetheless, industry experts have questioned the comprehensiveness of the 60-page Integrated Review Refresh from a trade strategy perspective. During the recent GTR UK conference in London, Rebecca Harding, independent trade expert with boutique consulting firm Rebeccanomics, referred to it as “the biggest trade policy document we have had without doing anything except state ‘we need fair and open trade’ and ‘resilient supply chains’”.

“It isn’t just about trade deals anymore – it’s about national strategy,” she added. “We are saying the right things, but the world has moved on since Brexit and the strategic role of trade in foreign policy is something that the UK government needs to understand and prioritise.”