The research highlights severe challenges for small businesses and a notable decline in trade volumes, although the overall impact was less severe than some earlier forecasts had suggested.

Researchers at the LSE’s Centre for Economic Performance (CEP) described the introduction of trade barriers as a “disaster” for small businesses, forcing thousands to halt trade with EU countries.

The report underscores how smaller enterprises, which often lack the resources to navigate complex regulatory changes, have been disproportionately affected.

The CEP study examined data from over 100,000 firms and found that by the end of 2022, two years after the UK signed the Trade and Cooperation Agreement (TCA) with Brussels, British exports had dropped by 6.4% and imports had fallen by 3.1%.

The findings provide a snapshot of the economic toll of Brexit in its initial years.

Thomas Sampson, one of the report’s authors, noted: “We find that, through the end of 2022, the TCA reduced goods trade by less than half as much as the Office for Budget Responsibility (OBR) projected.

“That said, the OBR number is a long-run projection, and we only study the first two years of the TCA,” Sampson said.

The study’s authors emphasised that, while the TCA’s immediate impact was less severe than anticipated, future developments could cause greater economic disruption.

“Whether the decline in trade will get bigger over time remains to be seen,” Sampson said, adding that further reductions would need to be substantial to align with the OBR’s long-term projections.

The UK is preparing for the next phase of TCA negotiations next year.

Ministers are expected to face pressure to open British agriculture markets to EU competition in exchange for enhanced access for UK goods to European markets.