UK Businesses Face Miles of Red Tape with New Brexit Border Rules

UK Businesses Face Miles of Red Tape with New Brexit Border Rules

2021-01-12 11:04:02
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While the miles of lorries in ports have disappeared, British companies are waking up to less visible friction at the European Union border that can cause longer-lasting damage.

From health certificates to new taxes and additional paperwork, the cost of moving goods across the English Channel is soaring with Britain's departure from the EU. Only 6% of companies told the Bank of England that they were fully prepared for things to come, and the headache starts in the new system just within two weeks.

While each of the new rules marks a slight shift from the border-free trade that Britain has enjoyed as a member of the EU for four decades, together they constitute a significant constraint. That's already starting to disrupt supply lines and throttle shipments for businesses of all sizes. The biggest blows are the UK's 5.9 million small and medium businesses, which employ about three in five in the private sector.

All told, Brexit could cost UK exporters 25 billion pounds ($ 34 billion) this year due to weak demand and increased red tape, shaving 1.1% of gross domestic product, according to a report from Tuesday. by the trade insurer Euler Hermes Group SAS. .

"There is so much complexity," said Adam Marshall, Director General of the British Chambers of Commerce. "It's like an onion: the more you peel, the more you cry."

Here are some of the biggest irritations that befell businesses because the UK is no longer a member of the EU's internal market and customs union:

Rules of origin

Post-Brexit UK companies will have to show where their goods are made – and where the components in those products come from – to determine if tariffs are levied on goods in the EU. Those rules do not exist for intra-EU trade, which makes the old system much simpler. In addition, value added tax (VAT) is now payable on all UK imports into the EU.

Confusion about the rules has already led to complaints from major retailers such as Marks & Spencer Group Plc. Others have discontinued sales to the EU. Debenhams temporarily shut down its Irish e-commerce site, while John Lewis Partnership Plc, Asos Plc and Fortnum & Mason stopped deliveries to Ireland.

“Companies have been completely blinded by the rule of origin part of the deal, putting them at a major competitive disadvantage when selling in the EU,” said Michelle Dale, senior manager at accounting group UHY Hacker Young. “Unfortunately, not enough has been done to prepare them. "

VAT

UK exporters must register to pay VAT in EU countries. This has prompted a number of companies to stop their cross-border trade, says Stuart Lisle, chairman of the Brexit task force at professional services provider BDO LLP.

"If we want to continue to sell our stocks in the UK to customers from every EU state, we must immediately file VAT registration in each target country," said Jennie Potts, co-founder of Mama Bamboo, which sells environmentally friendly disposable diapers. and wet wipes. "If we don't, we'll be held immediately accountable. It's so annoying. We have to wonder if it's worth all the time and effort."

Lisle said many of his customers have not faced these issues before and that the added cost and complexity "can be very expensive to manage."

Health checks

The Brexit deal did not align the rules for cross-border shipments of phytosanitary products, including plants and seeds. Agricultural goods qualify for zero-rate, zero-quota conditions, but not for live plants.

For Andrew Skea, director of Potato House in Dundee, Scotland, this basically means that the EU is simply not accepting its seed potatoes. The product has been grown in Scotland for over 100 years and half of Skea & # 39; s sales are in the EU.

“Until now, the EU has been a domestic market for us,” he said. "Now we need phytosanitary certificates, and the paperwork will have to be included with every order."

Bureaucracy and paperwork

In an effort to simplify the forms they have to submit, some shippers are now refusing to ship cargoes containing a mix of different products from different companies, according to trade association Scotland Food and Drink. That disproportionately harms companies that ship in smaller quantities. Another problem is that the terms of the deal were announced just days before the compliance deadline.

"If you don't give guidance hours until the end of the transition period and companies are busy with the pandemic, things will start to fall apart – and they will begin to fall apart," said James Withers, CEO of the trading group. It asks the government to request a grace period for enforcement by the EU until July.

Port delays and costs

The cost of transporting goods across borders is increasing with delays at ports and some transport companies are reluctant to take care of the hassle.

"Things get stuck," said Oliver Conger, president of Rototherm Group, a manufacturer of sensors and now personal protective equipment. "I now have to buy the stock out there in the UK at three times the price."

Hard new Covid-19 lockdowns shutting down non-essential businesses aren't helping. According to a survey by the UK chambers of commerce, four in ten companies said their cash flow deteriorated in the fourth quarter, with the slightest blow being hit even harder.

“Thousands of small businesses need to invest in technology, consulting and operational adaptations to continue trading across the EU, but they don't have the money to do so,” said James Sibley, who monitors international affairs at the Federation of Small Business . .

Dueling Certifications

Products sold in the EU require a CE mark indicating that they meet health, safety and environmental standards. The UK will develop its own certification meaning companies selling in both regions will be required to register for both standards.

"It's such a ridiculous level of duplication," Renee Watson, founder of The Curiosity Box, a subscription service that teaches kids about science. With annual sales of £ 500,000 ($ 673,000), the company will have to spend £ 20,000 on new safety signs to sell in the Netherlands, France and Germany.

Watson identified 26 areas of her business that would be affected by Brexit. "I'm struggling to spend so much time."

–With the help of David Goodman and Joe Mayes.

Copyright 2021 Bloomberg.

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