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It’s been two years since the UK signed a post-Brexit trade deal with the EU, but for small businesses like Doncaster-based Apothecary-87, the difficulties of trading across the English Channel show no signs of abating.
Owner Sam Martin’s range of premium beard oils and hair balms took off quickly when his company was founded in 2012, but export growth came to a shaky halt when the EU-UK trade and cooperation agreement came into effect on December 31, 2020.
“Before Brexit, 75 per cent of our business was exports and the rest was in the UK, but Brexit has turned that number on its head due to the costs and difficulties of getting products into those countries,” he said.
In a report to mark the two-year anniversary of the TCA, the British Chambers of Commerce said Martin’s frustration was typical of small and medium-sized companies who were now facing “structural” rather than temporary problems in deals.
A BCC membership survey included in the report found that three-quarters (77 percent) of companies affected by the deal said it was not helping them increase sales; While more than half (56 percent) of the respondents said they faced difficulties in adapting to the new rules for trade in goods.
BCC director-general Shevaun Haviland, presenting ministers with a 24-point plan to ease the burden on businesses, called for an “honest dialogue” with the government on how to improve the deal.
“There are very few easy fixes for many of the problems that consumers face trading with Europe, but it is disappointing that almost two years after the TCA was first agreed nothing has been done to find solutions to some of these problems,” she said.
Chief among the BCC’s demands is a Swiss-style deal with Brussels to remove checks on plant and animal products; A Norway-style deal to reduce complexities around VAT on low-value imports and unilateral recognition of EU industrial and electronic product standards.
In the longer term, the BCC says Britain should consider an EU-UK deal for VAT and an agreement to deepen EU cooperation on product regulation and facilitating professional services when the TCA comes up for its five-year review in 2026.
When he announced the eleventh-hour deal with Brussels on Christmas Eve 2020, then-prime minister Boris Johnson said there would be “no non-tariff barriers to trade” from the TCA.
However, Martin said Apothecary-87 faced a number of challenges post-Brexit, including higher import costs due to the weak pound, longer lead times to source ingredients, the need for a cosmetic import licence, EU border checks and payment of import VAT. – which prevents all EU customers.
He added that online retail customers in the EU who previously bought a product for £10 were facing VAT and handling charges that more than doubled or tripled the price, while barbershops in Italy and Spain were forced to obtain cosmetic import licences. was €1,000 each.
“Only a true ‘superfan’ of our products can accept such high prices,” said Martin, who urged the government to do more to ease the export route to the EU.
The BCC has also urged the UK to agree with Brussels to remove the need for a so-called “fiscal intermediary” – an EU-registered company able to declare and pay VAT – for small businesses to send products worth less than €150 to the EU. .
Analysis by Aston Business School suggests that exports to the EU would be 26 percent lower without the non-tariff barriers imposed by the TCA. After the new rules came into effect, the number of traded goods has dropped sharply from 70,000 to 42,000.
William Bain, head of trade policy at the BCC, said it was notable that responses to the annual membership survey had become increasingly vehement as businesses realized that the barriers posed by the TCA were not temporary, but permanent and structural.
“There is a high level of sentiment about how burdensome these costs and paperwork are, with a clear sense of anger that nothing is being done to relieve them,” he added.
For some businesses, such as Suffolk-based LMK Thermosafe, which manufactures industrial heaters for drums and containers, the answer is to relocate distribution networks to Europe to maintain reliable deliveries to customers.
Mark Newton, the company’s managing director, said it had struggled to hold on to EU clients, who represent 30-40 per cent of the business’ exports. He added that it is now easier to export to the US than to the EU.
Despite hiring an additional full-time staff member to help with the paperwork, Newton said there were still delays even when the paperwork was correct. “I was hoping to avoid an opening to the EU. I thought we could get the processes down, but I have to accept that it is now necessary. But all those costs add up and subtract from the margin,” he said.
He added: “TCA is definitely a growth inhibitor. The blue-chip clients have stuck with us, but with our EU competitors they’ve certainly been fussing with our distributors, saying ‘you don’t want to do business with the Brits, it’s too complicated’.
Overall, the BCC said its findings on the TCA in two years “should provide deep pause for thought by decision-makers” as discontent over the agreement has grown over the past two years.
It concluded: “The sudden imposition of non-tariff barriers on a trade sector after one sector has led many businesses to conclude that it does not currently allow free trade.”
The government said the TCA had secured market access for UK businesses in key service sectors and opened up new opportunities around the world.
“The UK has provided exporters with practical support on the implementation of the TCA, including an ambitious export strategy and the launch of a new export support service,” a spokesman said.
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