Brexit At Three: Fresh Trade Challenges Growing

Brexit At Three: Fresh Trade Challenges Growing

• Almost two thirds (60%) of firms trading with the EU say it is now more difficult to do so than it was a year ago
• Almost half (49%) of exporters disagree the Brexit deal is helping them grow sales.
• Two fifths (41%) of firms exporting under the Brexit deal say they face difficulties adapting to its rules on buying and selling goods.
• The BCC has sent the Government a new report setting out pragmatic solutions to many of the issues.

A new survey by the BCC’s Insights Unit of 733 businesses (97% SMEs) shows the difficulties facing British firms in using the Trade and Co-operation Agreement (TCA) have not eased.

The BCC report also highlights a fresh set of challenges approaching as UK and EU regulations diverge, creating further headaches for traders on both sides of the Channel.

The TCA was agreed on Christmas Eve in 2020 to allow tariff-free trade with the EU once Brexit took effect.

But a high proportion of businesses say trade with Europe in 2023 is now more difficult than it was a year ago.

The BCC has sent the Government its report examining the main issues the TCA is causing for firms with possible solutions to many of the problems.

The survey also found that 35% of firms buying and selling services faced difficulties due to the Brexit deal, while a lack of recognition for professional qualifications was exercising 27% of firms.

And awareness of upcoming changes in trade rules and regulations being made by either the UK or the EU was alarmingly low, with 80% or more of firms knowing no details of the legislation.

This includes knowledge of the Electronic Trade Documents Act, Export Health Certificate requirements, new labelling requirements, the EU’s Carbon Border Adjustment Mechanism, new checks on food imports, safety and security requirements for EU imports, UKCA and CE marking, and new EU VAT laws.

What Businesses Say

“Selling services to EU is now a bureaucratic nightmare requiring a work permit as a self-employed person. Even worse is the total lack of available advice about what to do as each EU state has its own rules. Therefore, reliant upon EU member states interpretation of TCA.”

Micro services firm in North East England 

“Each member state has different rules for UK workers, most are unclear of their requirements and the costs related to finding out, and the disruption if we get it wrong, is significant.”

Small construction, engineering, or trades firm in Glasgow

“Continued difficulties serving our long-standing EU customers – 50% of our turnover – has been reducing our profitability and will likely lose us business. The current EU-UK agreement does not make for ‘free’ trade. The government’s stated efforts for further away trade deals does not help, but distracts attention from unresolved problems. Supply chain bottlenecks and cost increases also continue to affect us.”

Medium-sized manufacturer in Cambridgeshire

Shevaun Haviland, Director General of the British Chambers of Commerce, said:

“If we want to put more money into people’s pockets and get businesses growing then we need to boost our exports, and the EU is our number one market.

“That’s a reality that should not be ignored by our political parties, but I also recognise that improving our trading relationship with the EU must be realistic.

“Any changes we make must work for both sides and respect the agreed framework we operate in.

“There are lots of things we can do to make our current trading arrangements better, but a growing worry is how we handle further changes coming down the track.

“EU businesses have been largely able to carry on importing goods into the UK as they did before Brexit, but that will change next year, and could lead to significant new disruption.

“The rules and regulations governing trade aren’t static. Both the UK and EU will be making significant changes in the next few years that could have big repercussions.

“We need to take a smart but flexible approach to how we handle these alterations to keep their impact to a minimum. It is in no-one’s interests to damage our trading relationship further.”

The BCC’s TCA Three Years On report sets out 26 recommendations to improve UK-EU trade.

Its top five proposals for quick action are:

1. Create a supplementary deal with the EU which either eliminates or reduces the complexity of exporting food for SMEs.
2. Work with the EU to develop simpler guidance on the Brexit deal so that it is applied consistently across all member countries.
3. Develop new arrangements on changes to regulations to minimise disruption to businesses and raise awareness of any fresh impacts.
4. Establish a supplementary deal, like Norway’s, that exempts smaller firms from the requirement to have a fiscal representative for VAT in the EU
5. Make side deals with the EU, and member states, to allow UK firms to travel for longer and work in Europe, and provide mutual recognition of professional qualifications.