The EU has released its plan to help fix the ongoing issues surrounding UK and NI trade in the wake of Brexit.
Whilst Northern Ireland has been kept within the EU’s single market to avoid a hard border with the Republic of Ireland, checks and controls have been in place for goods arriving from Great Britain.
The new plan proposed by the EU would remove around 80% of checks and cut paperwork in half.
The BBC reports that the EU is proposing:
- Most food products will not need to be physically checked when arriving into Northern Ireland from Great Britain.
- A cut to the required administration for Northern Ireland importers.
- Expanded trusted trader arrangements meaning more products and companies are exempt from customs tariffs.
- Change to current laws to ensure no disruption to moving medicines across the Irish Sea.
- Improved engagement with stakeholders in Northern Ireland including politicians and business groups.
The Northern Ireland Protocol was only introduced at the start of 2021, designed predominantly to prevent checks and the creation of a virtual border on the island of Ireland. But this has, in turn, created a trade barrier with Great Britain.
However, businesses on both sides have warned of ongoing issues, whilst there have also been serious concerns that the current set-up undermines the Good Friday Agreement.
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The British Chambers of Commerce has called out the Government for lacking Brexit business planning, resulting in UK workforce shortages.
After a weekend of fuel supply shortages and retailer Christmans warnings, the BCC made clear in a statement that businesses were suffering the consequences from excluding non-UK nationals from the UK workforce.
BCC President, Baroness Ruby McGregor Smith said that: “Government has made clear its priority is to transition from a reliance on EU workers to a focus on the domestic workforce, and businesses have been ready to participate in this, but it is a long-term project.
“A managed transition, with a plan agreed between government and business, should have been in place from the outset. Instead, the supply of EU labour was turned off with no clear roadmap as to how this transition would be managed without disruption to services and supply chains.
“Now some action has been taken, but additional testing will take time and the low number of visas offered is insufficient. Even if these short-term opportunities attract the maximum amount of people allowed under the scheme, it will not be enough to address the scale of the problem that has now developed in our supply chains. This announcement is the equivalent of throwing a thimble of water on a bonfire.
“Government should be prepared to significantly expand the number of visas issued within this scheme and convene a summit that brings business and government together to find both immediate and longer-term solutions to the many challenges facing firms throughout the UK.
“Without further action, we now face the very real prospect of serious damage to our economic recovery, stifled growth as well as another less than happy Christmas for many businesses and their customers across the country.”
BCC Co-Executive Director Hannah Essex added that: “Chambers of Commerce have been warning Government about critical labour shortages for months now – not just in the food and haulage industries but in hospitality, construction, the care sector and elsewhere in the economy. Whilst businesses will welcome that government is finally taking action, this scheme does not go far enough.
“BCC data has shown that 76% of hospitality businesses, and 82% of construction firms have faced recruitment difficulties in recent months. At the same time, we found 3 out of 4 exporters reporting no growth in sales in Q2.
“Businesses are facing the most difficult environment for a generation. On top of labour shortages – border delays, increased debt and the rising cost of materials, shipping and energy are all putting huge pressure on firms struggling to recover from the pandemic. All of these issues are hitting smaller firms the hardest.
“Attempts to address the deficit of HGV drivers and poultry workers is a step forward, but these industries are only the tip of the iceberg when it comes to the huge impact of the current labour shortages. Without a comprehensive plan to tackle this issue across the board we are facing a winter of lost opportunities for our businesses, hampering the UK’s economic recovery.”
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The UK is looking at alternatives to strengthening trade ties with the US as the chances of a quick turnaround on a bespoke trade deal look slim.
Prime Minister Boris Johnson is in Washington to meet US President Joe Biden, with the latter saying that a dedicated trade deal is unlikely in the immediate future.
Two core issues for Biden are the Northern Ireland protocol – something he has been vocally against over the last 18 months – and a deprioritisation on the US side to develop new bilateral trade deals, instead focusing on helping their economy recover from the pandemic from within and aiming to develop multilateral agreements instead.
Instead, the government could look to join existing trade pacts which would strengthen trade ties, namely the agreement already in place between the US, Mexico and Canada (USMCA). A series of mini deals could also be struck, including some British meat products now allowed to be exported to the US once again.
Johnson told reporters during his US visit that: “On the FTA [free trade agreement], the reality is that Joe has a lot of fish to fry.
“He’s got a huge infrastructure package, he’s got a build back better package. We want to do it, but what we want is a good FTA, a great FTA.
A back-door approach to stronger US trade ties could also be sought through the CPTPP trade agreement which also includes Australia and Japan – a pact that the US could join in the future too.
“We will keep going with free trade deals around the world, including in the United States,” Johnson continued.
“I have plenty of reason to be optimistic about that. But the Americans do negotiate very hard.”
Complex regulations surrounding Rules of Origin following Brexit has seen British businesses pay an additional £600m in customs duties in H1 this year.
The UK’s trade agreement with the UK, which was geared towards removing tariffs for all goods, has actually seen costs related to export and import activity increase for a swathe of industries.
Rules of Origin, which the UK government states are ‘some of the most important provisions that your business needs to understand and meet under the UK’s deal with the EU’, are still being adapted to by UK forms, with many saying they weren’t given enough time to fully understand the new regulations and trading conditions.
Fergus McReynolds at Make UK commented that: “We didn’t actually see the black and white of the text until Christmas Eve, and that didn’t give companies a lot of time to understand the implications.”
One of the most notable examples of how Rules of Origin are impacting UK firms is Marks & Spencer’s ever-popular Percy Pigs. Although they are manufactured in Germany and then imported into the UK (a pathway which wouldn’t induce a charge under the primary trade agreement between the EU and the UK), the re-exporting of the product from the UK into Northern Ireland is now a step in the supply chain which is subject to import taxes with the tariff exemption falling away.
Michelle Dale from accountancy firm Hacker Young noted that: “UK businesses weren’t given enough time or help to prepare for the cost of Brexit or the masses of paperwork.
“The result is that the cost of tariffs and extra paperwork is now causing serious difficulties for many businesses who are already struggling to stay profitable in the face of mounting pandemic-induced costs.”
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A chief executive at Maersk has said that the ongoing shipping crisis won’t end until consumer demand falls.
Morten Engelstoft, who manages APM Terminals which is owned by Maersk, said that the sector needed to break out of a vicious circle of high consumer demand married with the ongoing pandemic.
He told the Financial Times that: “We need lower [consumer demand] growth to give the supply chain time to catch up, or differently spread out growth. Over a long period of time, we will need to recover efficiency.”
Whilst noting that ports need larger investment to improve and grow infrastructure, he added that soaring consumer demand from the US, in particular, was placing strain on the entire system.
“It’s a percentage of an enormous volume. The sheer size of business going through is so enormous that the amount of port capacity, truckers, warehouses and even labour to man all the equipment has created a bottleneck.”
The port operator’s comments come days after UK retailers warned of expected Christmas shortages amid ongoing supply issues with supermarkets and large brands including Ikea and Halfords all saying they have shortages of certain in-demand products, from mattresses to bikes.
Increased consumer demand is being confounded by a global shortage of truck drivers, a lack of warehousing space and delivery delays due to the ongoing pandemic.
Exports of food and drink from the UK into the EU are in freefall.
That’s according to new figures released this month by the Food and Drink Federation, showing that exports to the EU have fallen by over 27% in H1 2021 compared to the same period two years ago. Overall, lost revenue totals around £2 billion.
Exports to Spain, Italy and Germany have fallen by almost half.
However, some export categories are still seeing growth. Whisky, soft drinks and salmon exports have all increased. And whilst the drop in export activity into the EU has been stark, the total loss of export revenue has been buffered by an increase in non-EU sales of 13%. The share of UK exports moving outside the EU has now risen from 40% to 47% as a result.
Dominic Goudie, head of international trade at the FDF, commented that: “The return to growth in exports to non-EU markets is welcome news, but it doesn’t make up for the disastrous loss of £2bn in sales to the EU.
“At the same time, we are seeing labour shortages across the UK’s farm-to-fork food and drink supply chain, resulting in empty spaces on UK shop shelves, disruptions to deliveries and decreased production. Unless steps are taken to address these issues, the ability of businesses to fulfil vital export orders will be impacted.”
John Whitehead of the Food and Drink Exporters Association said that there are a number of factors at play, including challenges in the supply chain and the inability to meet customers in person due to the pandemic.
“There is growing evidence that the complexity of trading with the EU has led to businesses moving operations into Europe and of importers looking for alternative suppliers, contributing to the ongoing decline in both UK exports and UK jobs.”
The huge shortage of HGV drivers in the UK is pushing up pay as hauliers start introducing retention charges on bills.
Tensions are said to be rising within the industry with the low numbers of available, trained drivers playing ‘musical chairs’ – something hauliers are looking to head off by adding ‘driver retention surcharges’ of around £65 per load to customer bills to directly boost employee pay.
One provider, speaking to Loadstar, said that the extra charges were on top of a 20% pay increase to his drivers. Smaller firms are warning that they’re being priced out of the market, whilst others have forewarned that the busy Christmas period could see huge disruption.
“Despite this increase, every haulier we deal with told us that from September there would be surcharges of between £50-65 per load,” the forwarder said.
“I cannot bear to think what December and peak season build-up will be like for container haulage when it is already this bad. Our hauliers told us this was a purely non-profit move, the money going directly to drivers to stop them taking more lucrative offers from larger firms.”
The government has this month urged UL firms to train and hire British drivers to fill what’s estimated to be 100,000 vacancies in the sector, driven by a combination of EU workers returning back to mainland Europe following Brexit, and a lengthy delay in driver training brought on by the pandemic.
They are also considering bringing forward a review of its Shortage of Occupation list to tackle the issue by assessing which jobs the UK will be more lenient in allowing overseas workers to apply for visas for.
Morrison’s CEO David Potts noted to the BBC that: “Maybe look at a list of people who come into the country to work, maybe add the drivers to that list for a while, see how we get on with that, because we need to break the back of the issue in order to keep what is a great supply chain working in Britain.”
Exports from Ireland into Great Britain have soared in the first half of 2021 whilst GB exports across the Irish Sea have fallen.
According to the Irish Central Statistics Office, exports to Great Britain (excluding NI) have risen 20% in the first six months of the year, rising by over €1 billion to €6.7bn.
This means activity from Ireland into GB has overtaken activity flowing in the other direction, with GB exports falling by 32% to €5.3 billion.
Food, live animals and manufactured goods have been hardest hit.
Why has the balance shifted?
In a word – Brexit.
The UK’s departure from the European Union and the single market has hit British exporters harder than their Irish counterparts due to border checks on shipments to the EU. However, for Irish and EU exporters into Britain, a more phased approach of checks has been implemented with the UK government opting for a 12-month transition period.
As a result, all food and plant exports into the EU from UK firms have been subject to sanitary and phytosanitary checks since the start of the year, whereas Irish businesses have not been subject to the same levels of red tape.
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The UN’s Intergovernmental Panel on Climate Change’s landmark report published this week painted a bleak picture for the future of humanity and the planet.
There was, however, some cause for optimism. We can halt the ever-warming climate, or at least limit it to below two degrees, but we’ll all have to play our part.
The report was wide in scope, but it did hone in on some specific areas that are obviously apparent to exporting businesses – those areas being global shipping and aviation.
And it’s not just how we can look to neutralise the carbon output associated with a consumer-led truly global planet. It’s also to do with the effect that increasingly worsening weather will have on supply chains.
Supply chains are already being impacted by extreme weather – weather that is becoming more frequent due to the warming planet.
Marine risk consultant, captain Andrew Kinsey noted to AGCS that: ”Weather is no longer seasonal. Year-round we see tornadoes, hurricanes, floods and storms affecting shipping and inland marine, as well as associated infrastructure. Almost every mode of transport is affected, with a knock-on effect for supply chains.”
Things look a little more positive on the freight front. Shipping and HGV industries have already made moves to cut emissions whilst legislation likely to be implemented in 2023 will require older ships having to hold permits to access EU ports. There’s also movement in the UK to test e-highways where HGVs will be powered by overhead cables.
The biggest challenge though will remain the aviation industry, both for passenger travel but also freight. Electric battery technology just is not yet available to power heavy freight loaders over huge distances.
The UK has signed a new free trade agreement with Norway, Iceland and Liechtenstein, expected to boost trade in a relationship with over £2billion a year.
Signed in London earlier this month, the deal with lock-in tariff-free trade and secure greater access for UK businesses.
The deal is one of the most advanced that Norway, Iceland and Liechtenstein have ever signed with gold standard provisions in digital trade, mobile roaming and business travel. High-quality British food and farm products will also see duty-free quotas with new reductions and quotas on pork, poultry and other goods.
On the signing of the new agreement, international trade secretary Liz Truss commented that: “Today’s deal signing is a landmark moment for trade between the UK, Iceland, Norway and Liechtenstein. It will support jobs, cut red tape, and open up more opportunities for the UK.
“I urge businesses across the country, from farmers to fintech, to seize the fantastic opportunities this deal presents.”
Elsewhere, the UK is closing in on an agreement with New Zealand after months of negotiations.
Truss again noted that: “We’re closing in on an agreement in principle, with six more chapters now complete.
“The UK and New Zealand share core values, a long history and a commitment to free trade. I want a modern agreement that pushes new frontiers in areas like green and digital trade.”
That deal would represent a key step towards the UK becoming a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – a £9trilion free trading zone spanning 11 Asia-Pacific nations.