The UK’s small and medium-sized businesses are seeing their EU markets disappear as they struggle to combat increased post-Brexit red tape and trading costs.
At the same time, EU businesses exporting into the UK market are benefiting from a lack of controls.
In an interview given to The Loadstar, one small business owner said that: “EU warehousing is the only way to get around costs and bureaucracy – it also means jobs and money go abroad – but if you’re small it’s not viable.
“Before Brexit, a third of our direct mail orders were in the EU. That went to nothing and we are slowly having to build it back up, but this means charging our direct mail orders from the EU half the price, with us covering the VAT.”
And those increased costs, or indeed reducing prices and swallowing taxes to remain competitive, have seen many businesses fail. In fact, between 2020 and 2021, 6.5% of UK businesses closed – the largest decline in 20 years. The pandemic had a hand to play in that of course, but many SMEs have directly blamed the departure from the EU as shutting off a core market.
Read more: 5 ways the crisis in Ukraine is impacting international trade
As the interviewee to Loadstar pointed out: “The increased cost of transport means that for our product, the cost has increased three to four times. Then there are the cultural differences; we are simply not going to sell many jazz records in Indonesia or Thailand, and you have to take into account the poverty gap with these new global markets – Europe is rich, while Asia, Africa, South America are poor.
“SMEs can’t wait 30 years for a vague ‘levelling-up’ promise. That’s OK for the likes of Shell, ICI, Unilever, GM, but not for us.”
The ongoing crisis in Ukraine has highlighted just how interconnected the world’s economy is. As with the pandemic, humanitarian, political and environmental shocks in one region can affect the global markets on a wide-reaching scale.
These five stats highlight the extent to which the war in Ukraine is impacting world trade.
Trade value sinks
Almost all major trade zones have seen a fall in value, predominantly due to the sharp drop in container ship traffic from Russia.
Keil Institute for the World Economy found through tracking shipping data that Russian imports are down nearly 10% whilst exports fell 5%. In the EU, exports fell 5.6% and imports by almost three and a half percent.
The US has seen falls too, whilst China has been the least affected with exports down 0.9% and imports actually increasing by the same amount.
Inflated shipping costs
UNCTAD has warned that a prolonged invasion of Ukraine could see freight rates inflate to levels that would adversely affect economies and drive up prices even higher for consumers.
They noted in a report that: “Black Sea-Med aframax and suezmax tanker earnings have jumped from about $10,000 a day on February 18 to more than $170,000 a day on February 25. The underlying freight costs have increased by about 400%.”
Trade routes have become more complicated through restricted air spaces, as well as government sanctions on Russian planes entering EU airspaces.
Food prices could rise still further
Whilst many economies struggle to slow inflation growth, numerous world organisations have warned that food prices could rise further and adversely affect poorer households. The Economics Observatory has already reported that food prices have increased since the start of the year, as high as 24% compared to 2021.
Closer to home, the rising cost of food has seen prices increase by 4.3% – the highest for over 10 years.
Slowing growth in the Asia-Pacific region
Sprightly economic growth following the mass relaxation of pandemic restrictions has now slowed, with China in particular expected to see expansion 0.4% lower than expected before the invasion. Worst-case scenarios are pitching China’s total economic growth at just 4% by the end of the year.
Key for organisations including the World Bank though is the impact on poorer and developing nations, especially within the East Asian and Pacific trading zones, where recent global economic shocks could lead to increased poverty.
UK exporters facing difficulties too
Closer to home, importers and exporters in the UK have seen a dampening effect on global trade too, with revenues activity and revenues rising by just 2-3% – half what was expected just two months ago.
Read more: The Expert Exporter: How do you find the right international distributor?
Coriolis Technologies chief executive Dr Rebecca Harding said that: “Since 2020 there has been a general drop in exporter activity and so seeing the expected post-Covid rebound fall flat offers little hope for growth as global geopolitical risk heightens.
“Our data has been indicating a decline in exports and exporters since last year, and our forecast is for further downside risk because of sanctions and uncertainty in the wake of the Russia-Ukraine crisis.”
What are the challenges for exporters to the EU post-Brexit?
In this webinar, we will look at the implications for your business, what it means for your exports, imports and future opportunities.
We will identify the challenges you need to address to successfully export to the EU post-Brexit, including the new rule changes that came into force at the beginning of 2022.
Watch free below!
Free resources noted in this video include:
Earlier this month, Go Exporting CEO Mike Wilson and founder of Customs Manager, Arne Mielken, discussed Mike’s journey to starting Go Exporting and why independence matters in customs and global trade advice.
Watch in full below!
What are the challenges for exporters to the EU post-Brexit?
In this webinar, we will look at the implications for your business, what it means for your exports, imports and future opportunities.
We will identify the challenges you need to address to successfully export to the EU post-Brexit, including the new rule changes that came into force at the beginning of 2022.
There are two dates available:
Last month we were delighted to join with the Liverpool Library to host a webinar on trading with the EU in 2022.
The webinar covers a number of key topics for businesses, including:
- What changes did Brexit introduce?
- What are the implications?
- Post-Brexit UK-EU trade guide
- What are the opportunities?
Watch the webinar in full below!
Learn more about adapting to the new trading relationship with the EU with our free Post-Brexit Planning Checklist here.
The majority of exporting businesses in a new poll say that the Trade and Co-operation Agreement between the UK and EU in the wake of Brexit is falling short on delivering the benefits it set out to achieve.
The survey, carried out by the British Chambers of Commerce, found that 71% of exporters feel that the new trading arrangement with the EU is not enabling them to grow or increase sales. Only one in eight said it was supporting growth.
Meanwhile, the majority of those quizzed also said that the TCA had increased costs, delays and paperwork requirements, putting UK firms at a competitive disadvantage.
Businesses cited a number of issues with the new arrangement, including a rise in costs for firms and their customers, a lack of resources to deal with new red tape for smaller firms, and an increase in EU customers put off from working with UK businesses over perceived additional trade complexities.
However, some businesses have managed to make light of the TCA, stating that trade had been able to continue without too many significant changes and that it was forcing companies to take a more global outlook with their export strategies.
Head of international trade at the Greater Manchester Chamber, Susana Cordoba, commented on the BCC’s findings that: “As from previous findings, we believe the UK Government must continue to work hard listening to what businesses are facing on the ground and offering practical solutions and support.
Read more: Brexit causing “increased costs, paperwork and border delays”
“Many SMEs are still struggling as they lack the knowledge and skills set to adapt to the new way of trading.”
Free Brexit support for your business
Go Exporting has been working closely with trade bodies and individual firms to help manage and mitigate the upheaval caused by the UK’s departure from the Single Market.
If your business is still struggling to adapt, a good place to start would be our free post-Brexit planning checklist which covers 10 key points including the HS Code, customs declarations and duties.
On the 3rd of March, we’ll be joining Liverpool Library for a free webinar on trading with the EU following the UK’s departure from the European Union.
In this webinar, we will look at the implications for your business, what it means for your exports, imports and future opportunities. We will identify the challenges you need to address to successfully export to the EU post-Brexit, including the new rule changes that came into force at the beginning of 2022.
Presented by Go Exporting CEO Mike Wilson, we will cover the following:
• What are the changes we have seen in our relationship with the EU post-Brexit?
• How do you identify the challenges in your business that you need to consider?
• How do you address the challenges and successfully trade with the EU?
• What are the opportunities brought about by Brexit and how do you make the most of them?
The debut report from the Global Britain Commission has suggested how embracing ‘global Britain’ could deliver a £474 billion economic boost through increased export activity.
The commission, led by former trade secretary Liam Fox, brings together some of the UK’s leading businesses to help make a success of Brexit, and drive the government’s global agenda.
Released just four months following the commission’s launch in October last year, this first report covers a range of areas including what ‘global Britain’ means, why it matters and analysis of the size of the prize for local firms and the economy as a whole.
Key takeaways include:
- Raising per capita exports of goods and services to the level of Germany would mean an additional £474bn of UK exports annually.
- This £474bn export boost could create up to 5.5m export-supporting jobs with a 7% higher-than-average pay.
- The US has the 19th highest rate of outward FDI per capita in the OECD. Raising this to match France’s level would equate to an additional £33bn of FDI outflow per year.
- The UK would see an extra £61bn of R&D investment if investment levels per person were raised to that seen in South Korea, supporting 1.9m jobs in the process.
- Raising the UK’s per-person venture capital investment levels to that of the US would be equivalent to an additional £19bn of VC funding each year.
You can read the report in full here.
In his introduction, Dr Fox noted that: “The UK remains one of the world’s top destinations for inward investment for well-defined reasons; a well understood and respected legal system; a skilled workforce with relatively (at least in a European context) liberal labour laws; some of the world’s top universities, open to business collaboration; a stable regulatory environment; moderate taxation policy; a vibrant tech sector; good IP protection and a creative and innovative environment for business start-ups.
“All these elements form a sound basis for future prosperity if we take full advantage of these factors and develop our competitive advantages further. As a huge services producer and exporter, we offer many of the products that developing countries will require to develop their economic and social capacities.”
A winning export strategy for your business
At Go Exporting, we help ambitious businesses to open a world of opportunities through exports. Learn more about how we can help you develop an export strategy here.
For more expert insights and analysis on everything from finding the best export market for your product to preparing for your export journey, sign-up to our Expert Exporter resource hub.
A parliamentary report has highlighted how UK firms have been hit by increased costs and border delays due to Brexit.
The report, created by the Public Accounts Committee, said that it was clear that leaving the European Union was also having an impact on UK trade volumes.
Whilst businesses around the world have reeled from the impact of the pandemic, the report said it was clear that the EU exit was having a negative impact for UK businesses.
PAc chair MegHillier said of the report that: “One of the great promises of Brexit was freeing British businesses to give them the headroom to maximise their productivity and contribution to the economy – even more desperately needed now on the long road to recovery from the pandemic.
“Yet the only detectable impact so far is increased costs, paperwork and border delays.”
The report set out a number of recommendations to the government to support UK businesses within the transition, including:
- Government must set out its scenario planning and modelling for passenger volumes in 2022 and clarify how it will manage the increased pressures and any contingencies that may be required.
- To minimise the costs to business as far as possible.
- Government should identify what issues businesses are facing in relation to the new border requirements and in particular determine how they can provide SMEs with additional support.
- Government should set out departments’ assessment of EU trader and haulier readiness, to determine whether any intervention by either itself or the EU may be required; and set out any plans for additional support.
- Government should continue its efforts to resolve the challenges of the Protocol and ensure that departments are ready to put any negotiated outcome into operation.
Post-Brexit planning checklist
For many firms, this is a confusing and frustrating time, especially for those with limited experience of customs declarations, licenses, VAT on import and rules of origin.
We’ve created a free checklist to help you navigate the choppy waters and adjust to a new trading environment.