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More than three-quarters of companies say the government’s post-Brexit trade deal with the EU has not helped them grow their business over the past two years, despite promises of an “oven-ready” deal.
A survey by the British Chambers of Commerce (BCC) has prompted the business lobby group to present the government with five urgent recommendations to boost the deal, which has left many exporters struggling to sell to the EU under current terms.
More than half (56%) of BCC members trading with the EU said they had experienced problems complying with the new rules for exporting goods, while 45% reported problems trading in services. Overall, 77% of companies trading under the deal said it did not help them increase sales or expand.
BCC director general Shevaun Haviland said: “Traders feel they are banging their heads against a brick wall because almost two years after the TCA nothing has been done to help them. [trade and cooperation agreement] The first was agreed. The longer the current problems go unchecked, the more EU traders will go elsewhere and the more losses there will be.
Group members, most of whom are small and medium-sized businesses, highlight difficulties in managing EU rules on VAT; inconsistent application of customs regulations; and new limits on business travel.
On regulation, two-thirds of members said they would prefer to continue using the EU’s CE mark of product quality, rather than switch to the UK’s new post-Brexit equivalent, the UKCA.
Nick Thomas-Symonds, shadow international trade secretary, said: “This is a damning report and shows the mess the Conservative government has made of trade policy. For three-quarters of businesses to say that government contracts are not helping them grow or increase their sales is unacceptable.”
The TCA was a key part of Boris Johnson’s “oven-ready” Brexit deal. The then Prime Minister announced that Christmas Eve had struck two years ago.
It allows UK goods to avoid EU tariffs but imposes additional customs and regulatory checks and other “non-tariff barriers”, as Britain chose to stay outside the EU’s customs union and single market.
The TCA is due to be reviewed in 2026, when it will have been in place for five years, but the BCC is calling on the government to urgently negotiate some changes.
“The TCA clearly has some structural problems that cannot be resolved until the 2026 review. But as we pointed out in our report to the government, there are some issues that do not need to wait for months of negotiations or major reviews. Be determined,” Haviland said.
One of the main demands is for the government to find an early solution to the standoff over the Northern Ireland Protocol to “stabilise” trade relations with the EU.
As talks continue between the two sides on the protocol, Rishi Sunak told US President Joe Biden that he wants to see an end to the impasse before next year’s 25th anniversary of the Good Friday Agreement.
Controversial legislation championed by Liz Truss that would bypass the protocol, which the EU warned could lead to a trade war, appears to have been shelved for the moment while negotiations take place.
Other BCC proposals include seeking an agreement to lift veterinary checks on agrifood exports; and negotiating an opt-out from a rule forcing small exporters to work with an EU-based “fiscal representative” to collect VAT.
Echoing other trade bodies, including manufacturers’ group Make UK, the BCC also wants to continue applying the CE mark to goods sold in Britain.
The BCC’s call for government action comes after research by the Center for European Reform (CER) think tank found that Brexit reduced GDP by 5.5% and cost £40bn in tax revenue.
In a new report, CER’s John Springford compares Britain’s post-Brexit performance with a basket of similar economies.
Using this approach, known as the doppelganger method, it finds that the economy is likely to be £30bn, or 5.5% smaller, in the second quarter of 2022 than it would have been had Brexit not happened. This is at the high end of recent estimates.
Springford argues that the weak economy has taken a toll on public finances, contributing to Sunak’s decision to raise taxes.
“If the UK economy had grown with a doppelgänger, tax revenues would have been around £40bn higher annually,” he said.
Conservative peer Gavin Barwell, who was previously chief of staff to then-prime minister Theresa May during her fraught Brexit negotiations, urged his colleagues to acknowledge the impact on the economy of leaving the EU.
“Our politicians cannot ignore this economic self-harm forever. It doesn’t mean we have to rejoin, but it does mean we need to reduce the very damaging barriers to trade we present with our closest neighbors,” he said.
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