Britain’s economy is set to take a £6.2bn hit from the sanctions issued against Russia in the wake of its war in Ukraine.
Official analysis of the trade measures issued earlier this month has found the restrictions will deal a multi-billion pound blow to the economy over the next nine years.
Foreign Secretary Liz Truss announced an export ban on a raft of items including luxury goods, oil refining goods and quantum computing products on April 6. The measures also banned the imports of some iron and steel products.
Ms Truss said the measures were designed to end Vladimir Putin’s war with the “toughest sanctions yet”. Britain also froze the assets of Russia’s largest banks and targeted another eight oligarchs from the country.
A report since published by the Foreign Office, detailing its economic analysis of the cost to the British economy, said: “The objective of these sanctions have been to constrain the development of the Russian military-industrial complex and strategically-important sectors, and these new measures seek to further constrain Russia’s strategic and economic capabilities.”
The luxury goods industry will take the largest hit as it stops delivering Bentleys, Aston Martins and Burberry handbags to wealthy Russians. Companies in the sector are tipped to take a £881.7m blow to profits by 2030, according to the Government’s analysis.
Insiders, however, have said the luxury industry fully supports the Government’s efforts.
Helen Brocklebank, chief executive of trade body Walpole, said: “All of our members have immediately complied with the sanctions imposed and are working to support local employees in any way they can.”
Major brands including Sotheby’s, Christies, and Burberry had already agreed plans to shut down in Moscow ahead of the announcement.
According to the analysis, the total value of the goods exported to Russia covered by the sanctions was £775.9m in 2021. These represented 27.9pc of all UK exports to Russia that year.
The luxury goods exports covered by the measures were estimated to be worth £766.5m, or 27.6pc of goods trade with Russia.
Profits for the computing industry are set to take a £4.1m hit, while companies exporting oil refining goods and technology will take a £6.7m blow.
The Government’s figures also assume a raft of extra costs from related products, such as insurance, sold alongside goods.
Britain’s economy will also be dented by supply chain effects, business foreclosures, and a “chilling effect” from businesses that are unsure if they fall in the scope of restrictions or feel unable to continue owing to fears of new sanctions.
The report said: “Whilst many businesses have elected to embargo exports to Russia beyond the formal sanctions in response to the invasion of Ukraine, there may be some residual exports that are stopped due to uncertainty around whether their goods or services are captured by this intervention , posing an additional cost.
“It is not possible to disaggregate this impact from the wider declining risk appetite of businesses caused by the situation that has precipitated this intervention to use additional trade sanctions against Russia.”
The trade measures come as ministers prepare to implement more wide-ranging sanctions on imports deemed important to the Russian economy.
The Government has committed to ending all imports of Russian coal and oil by the end of 2022, for instance, and officials are also exploring additional measures that could help cripple Moscow’s gas giants.