Chamber assesses impact of Brexit and looks at next steps on the way forward

SIX months on from the end of the transition period and with the focus on economic recovery from the pandemic, it might seem to some that the issue of Brexit has faded into the background.

But many businesses, and their customers, are still dealing with the reality of the significant changes ushered in on January 1. Tens of thousands of small and medium sized exporters have spent months grappling with the blizzard of new red tape and costs of getting goods to firms and people in the EU.

The introduction of the Trade and Co-operation Agreement (TCA) with Europe has created a whole new range of operational procedures - whether that’s dealing with import VAT, customs declarations, or safety and security certificates.

Although the situation for outbound goods at GB ports has been better than the Government’s own reasonable worst-case scenarios, there is still inconsistency in the way customs rules are applied on arrival.

Some of that has been mitigated by welcome, although temporary, easements such as on proof of origin of goods. However, in October and January inbound GB border and customs controls will begin to apply to goods being imported from the EU, involving billions of pounds in new customs and regulatory business compliance costs downstream in sourcing and supply chains. 

Some of these costs are short-term, others involve deep structural changes to business operations. Between the first quarters of 2018 and 2021, trade with the EU fell by around a fifth.

The BCC’s Trade Confidence Outlook for the first quarter of this year found that 41% of almost 3,000 responding companies said export sales had fallen. The ongoing pandemic and the new UK-EU trading terms were the key drivers of this. 

It is essential that a more positive and constructive approach is taken by both sides to tackle the unresolved challenges the TCA is causing firms, both in the UK and Europe. For example, businesses sending e-commerce goods from GB to NI also face considerable new burdens on customs declarations and processes in the autumn without long-term solutions in place.

But there are also signs of progress. Confirmation of the EU’s adequacy decision is a positive development: greater certainty in facilitating the two-way flow of data across borders is vital for trade to function effectively. However, the implementation of the TCA still needs to be smarter to minimise costs and checks for businesses so that we can start to rebuild the UK-EU trade gap back better.  

The Chamber is engaging with the Government on the ideas that can achieve this.

First, grants for SMEs from the Business Brexit Support Fund need to cover the real costs of changes to business operations brought about by the TCA. If necessary, they should be increased.

Second, on goods, renewed efforts to secure a mutual recognition agreement on conformity assessment are key to keeping costs down on product standards, marking and labelling regimes for manufacturers and suppliers.

Third, a summit on e-commerce needs to be held to bring industry and government together to find solutions to logjams, such as import VAT, which are stifling trade.

Finally, on hiring, we are already seeing shortages of drivers and workers in key sectors such as hospitality. Many workers from the EU went back to their home countries during the pandemic and may not return. Issues on skills shortages and labour mobility red tape need to be addressed.

As the economy reopens, firms will discover the reduced ability to offer services in the EU, and the effects of permit requirements and visa rules on stays in individual EU member states. The Government needs to grasp these issues by working hand in hand with UK businesses to champion a mutual recognition agenda on professional qualifications with the EU.  

The Chamber remains optimistic on the future prospects for UK businesses trading with Europe and the rest of the world. But it will require both the UK and the EU to work together on an ambitious agenda to fully embed, and build upon, the TCA.

There must also be a renewed focus on export promotion in UK trade policy. If this can be done, then the coming years will offer a positive direction for business and a lasting recovery from the economic effects of the pandemic.