Brexit ‘Teething Problems’ Could Ruin UK Businesses
Cross-channel businesses say ease of trading is the key measure of the success of Brexit, not the lack of lorry traffic on the roads in Kent.
The trade deal was hailed as an agreement that would ensure tariff-free access to the EU and that ‘sunlit uplands’ would follow ‘initial disruption’ to trade. But one month on from when the deal came into effect, businesses are warning that the ‘teething problems’ Boris Johnson referred to in a visit to Scotland last week are anything but.
Firms say the problems are typical of the endemic disruption that will force many businesses to restructure and could spell the end for some companies altogether.
Ben Fletcher, Policy Director of Make UK, representing manufacturers across the UK, said last month had been ‘like Dante’s fifth circle of hell’ for importers and exporters unable to move supplies because of new red tape.
A survey by Make UK of its members reveals that 60pc of companies that were ready for Brexit are ‘now experiencing ‘disruption’ and ‘also finding supply chains significantly impacted’. Mr Fletcher said there is ‘incredible frustration and real anger’ among businesses which import and export because they are simply unable to move goods.
The main problem appears to be paperwork which is proving ‘incredibly difficult’ to get right, compounded by a very low level of support from government.
As Mr Fletcher commented, the Cabinet Office reported the flow of cross-channel freight was much higher than anticipated with only ‘2-3pc’ of lorries turned away for not having the required paperwork or Covid test results. And there was now no expectation that the worst-case scenario it had modelled of 7,000 trucks queuing in Kent would be realised.
‘Rules of origin’ greatest obstacle to businesses
However, Shane Brennan, CEO of Cold Chain Federation, said Brexit stockpiling had kept traffic volumes down. Warehouses are 85pc full, down from 100pc before Christmas, but still above the 60pc usually seen in January.
He urged the Government to accept that the key test of the success of Brexit will be ease of trading and called for an end to crisis management, as this will be the way the UK trades for the next 50 years.
The greatest obstacle to businesses is the new rules of origin requirement, which will have a permanent impact on trade. Prior to Brexit, goods coming from the EU did not need to be certified as made in Britain or the EU to be sold freely within the single market.
But since January the provenance of all goods must be documented, including parts of an item such as metal from China in a bicycle made in Italy. Which could mean the difference between no tariff and a tariff that could range from 6.5pc duty on plastics to 1.7pc on vacuum cleaners, 12pc on coats and 14pc on bicycles.
The Food and Drink Federation (FDF) says the issue has been aggravated by a lack of notice and no uniformity in how paperwork is checked.
Gove to form new Brexit taskforce
Make UK says even large businesses, having spent two years preparing for Brexit, have been flummoxed by rules of origin and because the 1,400-page trade deal document was not published unti 26 January. They complain their EU suppliers were ‘unprepared’ for Brexit and are currently unable to supply audit trails for all goods.
Mr Fletcher believes people are beginning to realise how difficult it will be to add rules of origin to the existing trading rules. And these teething problems will become a structural problem, he added.
Mike Cherry, chair of the Federation of Small Businesses (FSB), has called for direct funding to ‘aid operational adjustments’ and raised concerns about couriers who have ceased taking goods from small suppliers that need health certificates.
Adam Marshall, Director General of the British Chambers of Commerce (BCC) said because nobody can be ready for a change of such enormity there must be open and continuous dialogue regarding easements and simplifications.
The Cabinet Office reported that Michael Gove had met trade representatives last Thursday and vowed to ‘pull out all the stops’ to help business with weekly meetings of a new Brexit taskforce.
The BCC has called on the UK and EU leaders to resume talks to help businesses on both sides of the channel struggling with the greatest disruption to trade since the single market was formed in 1993.