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Recovery in exports, but uncertain outlook for post-Brexit UK, says survey

Recovery in exports, but uncertain outlook for post-Brexit UK, says survey

A recovery in UK exports reported in February by The Office of National Statistics (ONS) has been short-lived, according to a new survey.

It comes as figures from Germany suggest post-Brexit trade between the two countries has dropped sharply.

German-British Chamber of Industry and Commerce members cited logistical problems related to Brexit as the biggest concern in a 2022 business outlook survey.

The latest Exporter Monitor by Coriolis Technologies and the Institute of Export & International Trade (IOE&IT) data also suggest that the number of exporters in the UK fell in April 2022 by 3.1 per cent.

The survey reveals that a total of 61,915 businesses exported in April 2022, with a combined turnover of £4,857,689,565 and 13,302,762 employees.

At the same time, the number of employees working for exporting firms declined, by nearly six per cent, while exporter revenues dropped by nearly four per cent compared to March 2022.

Outlook for trade looks difficult

The outlook for the coming months looks difficult for UK exporters, especially given the current geopolitical situation.

The survey suggests that there could be a mild uptick during May, but the June and July forecasts show that exporter counts will flat line at best. At worst, any May growth will be short-lived.

The Financial Times has also reported that UK trade with Germany has dropped sharply since 2016, lagging behind overall import and export levels in both countries

Data from Destatis, the German office for national statistics, revealed that German exports to the UK fell 3.9 per cent in March compared with February and were down 0.3 per cent on March 2021.

Compared with March 2019, exports to Britain were down 27 per cent, even though Germany’s overall exports grew by 16 per cent, the report said.

Is this because of leaving the single market?

The figures reflect the gradual decoupling of the UK manufacturing economy from the EU single market, said Ulrich Hoppe, Director-General of the German chamber.

“From a German perspective, the UK is to some extent being taken out of EU supply chains . . . because it has become more complex and expensive [to trade with UK] and that has an effect on bilateral trade,” he said.

The UK fell to the bottom of Germany’s top 10 trading partners for both exports and imports, and dropped to 13th place as a source of German imports in 2021.

Mixed confidence levels for UK businesses

Half of the companies surveyed were positive or very positive about their current and expected future performance in the UK, with half planning to increase their investment and to recruit more staff.

However, more respondents expect the UK economy to continue to ‘cool’ in the coming 12 months: 38 per cent expect a worsening performance and only 23 per cent expect it to perform better.

Ports consider legal action after border controls delayed again

Ports consider legal action after border controls delayed again

Further delays on border controls at UK ports caused by Brexit have led to some of the country’s biggest ports threatening to sue the Government.

According to the Guardian newspaper, they are considering legal action to recover the costs of building border control posts they fear will never be used, after confirmation that post-Brexit import checks will be delayed for the fourth time.

Brexit Opportunities Minister, Jacob Rees-Mogg, announced that after being delayed three times, physical checks on fresh food and plants from the EU, which were due to begin in July, have been pushed back to the end of 2023.

New strategy in the autumn

According to the news website, he announced plans to digitise all checks and paperwork at the border, with a new strategy published in the autumn.

The decision means that the UK will effectively continue to rely on the EU to monitor food and plant safety. Food producers said they were being placed at a disadvantage compared with European competitors who would have less red tape to deal with.

The British Ports Association (BPA), a lobby group for the industry, said it was concerned the expensive border posts, subsidised with nearly £200m from the taxpayer, may never be used.

‘White elephants’ claim

Richard Ballantyne, the BPA’s Chief Executive, said ports had rushed to get infrastructure ready on time: “This announcement is a major policy change, meaning the facilities will effectively become white elephants, wasting millions of pounds of public and private funding”.

Checks on meat were due to start on 1 July and on dairy on 1 September, with all remaining goods including fish and composite foods to be subject to checks from 1 November. A date for controls on live animals has yet to be agreed.

The operator of Eurotunnel, through which a quarter of all trade between the UK and EU passes, welcomed the announcement.

‘Question of fairness’

“We would have had to check more certificates, more declarations, and would not have been able to board trucks which didn’t have the right paperwork to go with the goods,” said John Keefe, director of public affairs at Getlink.

However, the National Farmers’ Union called the move “unacceptable” and said it was another blow for British food producers, as they grapple with soaring costs.

“This is a question of fairness,” said NFU’s President, Minette Batters, calling import controls crucial “to the nation’s biosecurity, animal health and food safety”.

The British Veterinary Association also criticised the move, saying it “flies in the face not only of common sense, but also of the government’s commitment to preserving high levels of animal and human health in the UK”.

For help and advice with Brexit related matters, please get in touch with our expert team today.

What impact are Brexit rules having on EU-UK trade?

What impact are Brexit rules having on EU-UK trade?

Businesses have had to get to grips with many changes to trade with the EU in the post-Brexit era and a new study has suggested that new rules introduced last year have caused a “major shock” to UK-EU trade.

According to the latest LSE Centre for Economic Performance study, imports from the EU to the UK fell by a quarter relative to those from elsewhere in 2021.

The LSE analysed trade patterns of around 1,200 products between the UK and the continent and also found that there had been a “sharp drop” in the number of relationships between UK exporters and EU importers.

The researchers have said that the findings are surprising given the fact that the UK has delayed the introduction of many customs checks on EU goods until this year.

Exports to the EU are recovering, but the study team said that much of this was down to an increase in sales of costly machinery.

When looking at the wider variety of goods sold to the EU, this was in decline by up to 30 per cent, with research suggesting that the administration of the new rules made it less attractive for smaller businesses to sell low-value items in European markets.

Thomas Prayer of the LSE said: “It appears the UK simply stopped selling a lot of products to smaller countries in the EU.”

What new challenges has Brexit created?

Having reviewed the various factors behind the decline in trade, the LSE researchers pointed at three primary factors limiting trade:

  • Additional red tape
  • New customs controls
  • Taxes and tariffs hitting European businesses hard.

Could things get worse for EU-UK trade?

At the moment full border checks have still not been implemented and these remain delayed until July at the moment.

There are already rumours growing that this final set of border checks may be delayed further in the months ahead to support trade and prevent a sudden surge of additional costs and administration.

However, given the main trade barriers appear to be the controls and costs and work involved in checks and red tape there are clear fears about the volume of exports between the UK and EU in future.

Nevertheless, the EU remains a close trading partner with the UK and many opportunities still exist for businesses to enter new markets on the continent with the right support and advice.

Setting up in the EU – An alternative solution to Brexit trade challenges?

Setting up in the EU – An alternative solution to Brexit trade challenges?

Many businesses are still trying to get to grips with the new and changing EU-UK trade rules more than two years on from Brexit.

However, a growing number of UK companies are trying an alternative approach – setting up in the EU.

Prior to Brexit, this suggestion was touted by a number of different businesses as a means of getting around the complex trade rules and requirements.

Now new data from the government agency, Invest in Holland, shows that more than 90 investors have built or rented distribution space to British firms since 2017 – half of this activity took place in the last year alone.

The benefits of creating an EU hub

While trade relations between the EU and UK have, in most cases, improved to some degree since the initial impact of Brexit there are still challenges that persist, which can be complex and costly.

Setting up a distribution hub or  subsidiary business in the EU could help UK businesses to enjoy:

Freer trade – If a company can declare that they are an EU company it can enjoy the benefits of EU membership, including free trade. Any goods or services that they move between member states will be tariff-free and frictionless. However, if they transfer goods and services between the UK and the EU, they will still be subject to the changes associated with Brexit.

Less bureaucracy – Providing goods or services from the EU to other EU member states means that businesses face less red tape, which can help to speed up sales and delivery processes.

Local knowledge – Although the EU and UK remain aligned in many ways still, having a hub within the EU can provide access to EU workers who have a better knowledge of local markets and trading requirements.

Lower costs – Although setting up a base or hub in the EU may initially seem costly, it may prove to be more cost-effective as it eliminates some of the cost of transport and the complications brought on by the new trade arrangements.

Greater growth – Creating a new base in an EU country might also help a business to expand into new markets quicker than before and be a driver for growth overseas.

How to set up a company in the EU

Most companies who plan to expand their business with an EU hub or subsidiary do so as a European company or SE (Societas Europea).

This is a public limited liability company that allows your business to operate under a single European brand name across multiple member states while following a single set of rules.

To set up an SE company, you should:

  • Locate your registered office and your head office in the same EU country.
  • Have a subscribed capital of at least €120,000.
  • Have a presence in at least two EU countries.

In some cases, certain EU member states have additional requirements for an SE company, so it is important that you check this beforehand.

If you don’t meet the eligibility criteria or do not think this approach is right for you, you could choose to set up individual companies in different member states.

As the establishment of an overseas company or subsidiary could have an impact on the finances and tax position of your UK company it is important to seek advice from an experienced accountant beforehand.

To find out how we can help you establish new hubs overseas or advise you on other approaches to improve trade with the EU, please contact us.

Big fall in businesses exporting to EU ‘caused by Brexit red tape’

Big fall in businesses exporting to EU ‘caused by Brexit red tape’

The number of UK businesses exporting goods to the EU fell 33 per cent to 18,357 in 2021, from 27,321 in 2020, data from HMRC shows.

Industry experts said the fall is due to the extra red tape UK businesses must now comply with when exporting to the EU.

They say they are really worrying numbers and show the scale of the difficulties UK businesses now face in exporting their products to the EU.

Lost opportunities for growth

Sources said that businesses are not getting enough support from the Government to navigate the post-Brexit trading minefield.

They believe a lot of SMEs can’t afford professional advice to cope with Brexit-related red tape. Many are likely to have decided trading with the EU is not worth the cost.

There were warnings that fewer UK companies exporting to the EU will result in lost opportunities for growth and expansion in Europe.

Problems have been continuing at Dover where ‘Brexit scenarios’ had contributed to delays according to the head of the British Ports Association.

Chief executive Richard Ballantyne said the traffic was mainly down to the suspension of P&O ferries sailing after it sacked 800 members of staff, but he pointed to Brexit bureaucracy as another factor.

Ferries suspension a major factor

Speaking to Sky News, he said: “There’s still congestion. P&O Ferries is out of service at the moment, which is probably the main cause of all the congestion – coupled with one or two other little incidents, and other Brexit scenarios.”

Problems with a key IT system for post-Brexit customs checks had contributed to traffic chaos around Dover, where thousands of commercial lorries had been stuck in queues.

The Road Haulage Association (RHA) said the HMRC was “continuing to have issues” with its new GVMS system for customs declarations needed by hauliers following Britain’s exit from the EU.

But an update from HMRC was set to alleviate the problem this week as the tax authority said:

“We can confirm that the continuity plan that was in place over the weekend has now been lifted. The Goods Vehicle Movement Service (GVMS) is now fully operational, and you’ll need a Goods Movement References (GMRs) for all movements using GVMS.

“We apologise for any inconvenience caused whilst we investigated the issue.”

What has been causing delays?

Hauliers have said it has been taking 15 to 20 minutes for each driver to clear checks needed since full customs controls came into force at the beginning of January.

Last month The Independent news website revealed that the Government is exploring a delay to new controls on imports set to come in July 2022 because of growing alarm over the cost of living crisis.

For help and advice with related matters, please get in touch with our expert team today.

Divided opinion over the introduction of new border import controls

Divided opinion over the introduction of new border import controls

New post-Brexit rules for imports, due to be implemented on 1 July, have provoked a mixed reaction.

A trade body is calling for delay while the British Veterinary Association (BVA) says delays to checks risk allowing infectious animal diseases into the country.

The Independent news website earlier this week that the Government is exploring a delay to new controls on imports from the EU because of growing alarm over the cost of living crisis.

The Sanitary and Phytosanitary (SPS) checks coming into force on 1 July will see inspections on imported agri-food and plant products and live animal products, adding an estimated £1 billion to the costs of trade.

Shane Brennan, Chief Executive of the Cold Chain Federation, giving evidence to the UK Trade & Business Commission, said the checks would be a “nightmare” for small businesses – calling for the Government to push them back.

The food industry chief warned of a potential collapse in trade among small volume British businesses if the new checks are imposed in the summer.

What do the new rules include?

But the BVA has warned that Government plans to delay checks on EU agri-food and live animal imports could risk allowing devastating infectious diseases, such as African swine fever into the country.

The already-delayed rules include a requirement for veterinary certificates and potential spot checks on agrifood imported from the EU.

However, the Government is said to be considering a fourth delay to the introduction of SPS checks because of already mounting supply issues and the cost-of-living crisis.

Serious consequences

James Russell, the Senior Vice President of the BVA, will tell the international trade select committee this month that dropping checks would have serious consequences for UK biosecurity and affect trade as it would damage the trust that overseas businesses have in UK produce, The Observer newspaper reported.

“If these controls are dropped there is a potential risk of an incursion of African swine fever which is spreading rapidly and has already had a catastrophic impact on animal health and agricultural industry in parts of Europe, Asia and Africa,” he said.

‘Dramatic decline’ in exports

Brexit Opportunities Minister, Jacob Rees-Mogg, is reported to have asked Prime Minister, Boris Johnson, to extend the grace period for EU imports to require SPS checks.

Mr Brennan told the commission that exports from the UK had seen a “dramatic decline” when checks were introduced and that the same could be expected for imports from 1 July.

For help and advice with related matters, please get in touch with our expert team today.