Many businesses in the UK are still finding it difficult to manage the post-Brexit trading environment six months into the new regime, new studies have revealed.
In particular, firms expressed concern that new customs controls are negatively impacting trade, while the prospect of additional costs and red tape as a result of the UK-EU agreement has resulted in around one in six firms halting trading with the EU.
These were among the key findings of studies carried out by both the Institute of Directors (IoD) and the Chartered Management Institute (CMI) on behalf of the Financial Times. The newspaper said the results "paint a bleak picture" of trading arrangements, especially for less-sizeable firms that do not have the resources to manage the new barriers to commerce.
Trading volumes remain depressed
The IoD's study, which asked 651 companies for their assessment of the impact of Brexit, revealed almost a third (31 percent) reported that new barriers to trade since the start of January had a negative impact on their business. Meanwhile, just six percent had seen trade with the EU increase.
What's more, many respondents were pessimistic about the impact of new import controls, which are set to be brought in next January after extended transition periods expire.
Around two-thirds of respondents anticipated these customs controls will have a further negative effect on trade, with around one in six saying there would be a "significant impact".
Jonathan Geldart, director-general of the IoD, said that six months on from Brexit, it's clear that many businesses are still "wrangling with the challenges" of the UK's changed relationship with the EU.
"Small and medium-sized firms in particular are struggling to navigate new procedures around exporting and importing with the bloc, while business leaders are more broadly reporting difficulties in recruiting following an end to freedom of movement," he said.
The CMI's research, meanwhile, found that over a quarter of managers in the private sector reported a drop in turnover in January, while six months later, the same proportion (26 percent) were still seeing a negative impact.
However, it wasn't all bad news. More than half of managers polled by the CMI agreed that some of the hurdles they faced in January have been resolved to some extent, which suggests many firms are beginning to overcome their initial teething troubles.
Meanwhile, 17 percent of respondents to the IoD's survey said Brexit had made it more likely that they would invest in their business, compared with 15 per cent who said investment was less likely. One contributor reported, for example: "I am generally becoming more optimistic about the economy as a result of Brexit, so [am] more likely to invest in future."
Businesses make significant changes to operations
The Financial Times also noted that many firms have made substantial changes to the way they operate as a result of Brexit, such as moving activities across the English Channel or even abandoning markets altogether.
For example, it highlighted the Cheshire Cheese Company, which has opted to stop bulk wholesale activities in the EU after the cost of sending a consignment to the continent increased from £300 to more than £1,300, which has meant it is no longer viable for the firm to do business with the EU's 446 million consumers.
Owner of the business Simon Spurell explained he had been told by UK government ministers to seek out new markets such as Canada, but this has also proved impractical.
"We shipped our first parcels to consumers and within a week we had to stop sending to Canada after 14 parcels were subjected to an additional 245 percent duty," he said.
Elsewhere, vintage motorbike trader Motorcycle Broker has also stopped doing business with the EU, which previously made up around 15 percent of its sales. The firm also used to source its supplies from the EU, and although it has found alternatives in Australia and the US, it can now take months rather than days to bring bikes into the UK.
Overall, the IoD found that nearly a quarter of businesses that trade with the EU have had to relocate some operations or staff, which has led to increased time, costs and paperwork.
Firms failing to utilize zero-tariff rules
Elsewhere, despite the agreement between the EU and UK seeking to ensure a zero-tariff trading environment, an analysis by the University of Sussex has found around ten percent of British goods exported to the EU have still been subject to duties, which amount to a total of up to £3.5 billion.
This is mainly the result of new rules of origin requirements and firms failing to navigate increasingly complex paperwork, especially in cases where goods are imported and then re-exported to the EU.
Prof Michael Gasiorek, trade expert at the University of Sussex, said: "Tariff-free trade is only tariff-free if firms not only meet the rules of origin criteria, but also can deal with the necessary bureaucracy and paperwork."
"What this analysis shows is that in the first quarter, around 27 percent of trade that could have entered tariff-free did not do so."
This requires companies to establish processes for the calculation of the origin of goods which conform to applicable laws and auditing requirements in order to avoid possible fines and future unplanned costs.
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