A Defra survey of 600 small food and drink manufacturers, published on Friday, found 55 per cent of EU exporters reported lower profits.
The research, carried out by ICF for Defra, covered firms across England, Scotland and Wales. It asked about the effect of the new trading requirements introduced in January 2021.
Among importers from the EU, 47 per cent reported lower profitability, eight percentage points below the figure for exporters.
Environment Secretary Dame Angela Eagle said the numbers represent firms that should be selling abroad. In her words, each figure is “a family firm that should be selling great British produce abroad but is instead stuck in paperwork”.
She said that was why the government is negotiating a deal with the EU to cut red tape and ease pressure on food price inflation.
Of the small and medium-sized firms that have stopped trading with the EU since 2021, 69 per cent of exporters and 55 per cent of importers said Brexit was a major reason.
Defra said smaller businesses, often family-run, have been particularly exposed to the costs of complex paperwork, border checks and delays, because they have fewer resources to absorb the extra burden.
Some 58 per cent of the manufacturers said a new UK-EU food and drink agreement could help them increase, resume or begin exporting within a year. Half said the same for imports.
Asked what would make the biggest difference to exports, firms named less paperwork (79 per cent), lower trading costs (78 per cent) and fewer border delays (71 per cent).
For imports from the EU the same three priorities scored lower, at 68 per cent, 65 per cent and 64 per cent respectively.
Clear guidance was rated extremely or very influential by 71 per cent of exporters and 61 per cent of importers, ahead of trade promotion or training.
Defra said it is working with trade bodies and local business networks so that support reaches firms in every part of the country.
The survey findings reflect businesses’ own reports and stated intentions.
The findings come ahead of the UK-EU summit on 20 November, while the government negotiates the food and drink agreement.
Under the planned sanitary and phytosanitary agreement, the UK will align with EU rules on food and feed safety, food labelling, organics, pesticides and biocides, among other areas.
Defra said it expects that in many cases the EU rules will replace, not add to, current rules.
It said divergence since leaving the EU has in many cases been minor or minimal. The department listed coffee and sugar composition and labelling as areas where UK rules have not significantly diverged.
The agreement would also remove certain checks at the border between Great Britain and the EU, and replace UK plant passports with EU ones. Checks on imports from the rest of the world will remain, with UK check rates aligned with those the EU applies.
The list of legislation in scope will be updated once negotiations conclude. Defra said detailed, practical guidance on what businesses will need to do will follow.
The EU has accepted that the UK will keep its own rules in some areas, as set out in the May 2025 Common Understanding, with details still subject to negotiation.