UK firms continue to struggle with EU trade post-Brexit

Brexit | | MIC Customs Solutions |

New figures have revealed the extent of the collapse in trade between the UK and EU in the three months following Brexit.

It's now been three months since the UK formally left the EU single market at the end of the transition period. While some disruption and teething problems were to be expected, several trade organisations in the UK are warning that barriers to the movement of goods have been much higher than expected.

New figures released in March have revealed the extent of the disruption for many firms, with the UK's Office for National Statistics recording a 40.7 percent drop in exports to the EU in January compared with the previous month, as well as a 28 percent decline in imports from the continent.

While some of this can also be attributed to tougher COVID-19 restrictions and pre-Brexit stockpiling, it remains the biggest fall since records began, and industry bodies are warning that some exporters in the UK are already struggling to survive.

Smaller firms struggle with red tape

Research by the Federation of Small Businesses (FSB), for example, found almost one in four small UK firms (23 percent) have temporarily stopped selling to the EU in the last quarter. Meanwhile, a further four percent have decided to abandon sales to the EU permanently and 11 percent of businesses are considering this.

A major issue is the large amount of paperwork they are now required to complete, which has proven to be especially challenging for firms with fewer resources available. As a result, more than half (55 percent) have sought professional advice to help with issues such as management of customs declarations, rules of origin paperwork and new tax obligations.

In addition, 70 percent of importers and exporters have experienced delays in moving goods to and from the EU, with one in three reporting items lost in transit and 34 percent seeing shipments held indefinitely at EU border crossings.

Food and drink sector faces new barriers

Some sectors have faced even bigger barriers. An analysis by the Food and Drink Federation, for example, revealed that exports to the EU declined by more than 75 percent year-on-year in January, from over £1 billion in 2020 to just £256 million in 2021. 

The organization said: "Much of this is likely due to new non-tariff barriers faced by UK exporters and the collapse of groupage movements which has shut out many SME exporters."

Some of the biggest declines were in animal products, which have been particularly affected by the need for new health certificates. Exports of salmon, for instance, were down by 98 percent, while beef and pork fell by 91.5 percent and 86.9 percent respectively.

However, other goods were also impacted. Exports of Scotch whisky were down by 63.2 percent, chocolate by 68.4 percent and breakfast cereals by 74.4 percent.

Cheese exports fell by 85.1 percent, and some producers have accused the government of a lack of support. One dairy, Cheshire Cheese Company, told the Guardian how environment minister Victoria Prentis and her aides had told the company in a meeting there was nothing that could be done about the extra paperwork burden, and had instead suggested the firm should look to new markets such as the US and Canada.

Co-founder of the firm Simon Spurrell said this is not practical for companies like his due to prohibitive delivery costs, noting: "It was a fairly useless conversation as a whole." He did add, however, he has had many messages from countries within the EU offering to help set up operations on the continent in order to avoid these issues.

Calls for new agreements

Trade groups have warned that unless new arrangements are made between the UK and the EU, these problems are set to continue for the foreseeable future, and could even get worse. 

Head of international trade at the Food and Drink Federation Dominic Goudie warned that EU exporters to the UK are set to face many of the same difficulties from 2022, when the UK's grace period for importing into the country expires.

He said: The EU-UK Partnership Council and its Trade Specialised Committees should be convened as a matter of urgency to put in place solutions that deliver the Trade and Cooperation Agreement's aim of enhancing the ability of small businesses to benefit from trade."

The FSB has also called on the UK government to take steps such as increasing the threshold at which tariffs and taxes for imports and exports apply to £1,000, providing more support to small and medium-sized businesses through the SME Brexit Support Fund and striking new, ambitious free trade agreements with other countries around the world to open up new markets.

Chief executive of the organization Mike Cherry said: "Unless more is done to ease the admin burden on those that do business overseas, and increase access to markets outside the EU, it will weigh heavy on our efforts to recover from the most severe downturn on record."