Brexit made firms leave the UK. Trump’s tariffs could bring them back

In 2016, the U.K.’s vote to leave the EU prompted many businesses to shift operations to the European continent, taking investment and headcount with them.

Fast forward to 2025, and the specter of U.S. President Donald Trump’s 30% trade tariffs on the EU, which will kick in on Aug.1 unless a trade deal is reached, could bring them back.

“The U.K. could be a big indirect winner” if the threatened U.S. duties on the EU become a reality, according to Alex Altmann, partner and head of the German desk at London-based accountancy and business advisory firm Lubbock Fine.

“If the tariff rate for the EU finally ends up anywhere near this 30% level then the U.K.’s much lower U.S. tariffs would offer a major incentive for EU companies to shift some of their manufacturing to the U.K. or to expand their existing U.K. facilities,” he noted in emailed comments. 

“The U.K. has a lot of spare manufacturing capacity after Brexit. A big gap between U.K. and EU tariffs would be a major opportunity for the U.K. to regain some of its lost status as a key European manufacturing hub,” added Altmann, who is also the vice president of the British Chamber of Commerce in Germany.

As things stand, the U.K. has already struck a trade deal with the U.S. that reduces duties on cars to 10% and grants it the lowest duty on steel imports. London also has a “reset” deal with the EU, after the Labour government under Prime Minister Keir Starmer — who was opposed to Brexit — carved out a trade agreement following years of post-referendum acrimony.

The sweet spot the U.K. now finds itself in comes after several years of uncertainty and angst for businesses, as they’ve tried to navigate a post-Brexit world of more red tape and barriers to export.

That’s been an ongoing gripe for exporters, given that the 27-country EU remained the U.K.’s largest trading partner after Brexit was finally enacted in 2020. The EU accounted for more than 50% of Britain’s foreign trade in goods in 2024, according to the European Commission.

A number of big businesses, and particularly financial services firms such as Goldman Sachs and JPMorgan, sought to avoid the transnational regulatory complexities of the post-Brexit landscape by relocating operations and assets to other financial hubs in the EU, such as Dublin, Paris, Amsterdam and Frankfurt. The exodus was ultimately not as dramatic as was initially feared.

Supporters and critics argue over the merits and disadvantages of Brexit and the divorce from the EU’s single market and customs union, as well as the free movement of goods and people that came with EU membership. Yet most economists agree that Brexit dented U.K. exports, jobs and economic growth.

The Office for Budget Responsibility, the U.K.’s independent forecaster, estimates that exports and imports will be around 15% lower in the long run, compared to if the U.K. had remained in the EU.

Although economists argue over the impact on the wider economy, it’s generally agreed that the U.K.’s GDP is around 5% lower than it would have been, had Britain not voted to leave the bloc.

While the U.K. is reveling in its newfound harmony with its American and European business partners, the extent of any windfall that comes as a result of the EU’s trading pain with the U.S. remains to be seen.

It remains unclear whether Trump’s planned 30% tariff on the bloc will actually go ahead on Aug.1. The U.S. president’s mercurial nature means the ultimate levy rate could go higher — he previously threatened a 50% tariff — or lower, toward the baseline 10% level that the EU is pursuing.

Not everyone agrees that the U.K. could benefit from trade misfortunes that befall the EU, whatever the outcome of last-ditch talks between Brussels and Washington.

“First of all, the 30% tariffs for the EU, they’re not a given,” Carsten Nickel, managing director at Teneo, told CNBC last week, pointing out that any potential post-tariffs shift in business investment from Europe back to the U.K. would be unlikely to happen quickly.

“If we were to talk about moving production facilities from Europe to the U.K. because the U.K. has a deal with the U.S. — the time horizon for that is a multi-year, if not decade-long, kind of time horizon,” he said.

In addition, Nickel noted that the U.K.’s strength remained in financial services rather than in manufacturing, which remains more prevalent in export-oriented countries like Germany and Italy.

“The reality is that the U.K.’s comparative advantage is not in high-end manufacturing … so the idea that you’re going with this stuff that you’re currently producing in, say, Germany and Switzerland, and you’re moving that to the U.K. tomorrow … it’s just not a decision that that a business leader in Europe can take just like that,” Nickel said.