The economic landscape of the UK has shifted massively since both Brexit and the pandemic. A nation that once used to build and manufacture its GDP now relies heavily on a financial services heart as trade with our closest major market becomes increasingly difficult post-EU departure.
And this has led to difficulties around productivity, and a slowdown in inwards investment too.
The productivity puzzle
The introduction of customs checks and the need for additional paperwork have slowed down the process of international trade, impacting industries that rely on just-in-time supply chains in particular. Furthermore, the uncertainty surrounding the UK’s future relationship with the EU has made it difficult for businesses to plan for the long term, stifling investment in productivity-enhancing measures.
Brexit has also had a tangible impact on the workforce too. The end of free movement has led to labour shortages in key sectors such as agriculture, healthcare, and hospitality. These shortages not only hinder operational capacity but also place upward pressure on wages, further squeezing businesses’ ability to invest in productivity-enhancing technologies and training.
Investment challenges
The sentiment around investing in the UK has notably shifted post-Brexit, as highlighted by Jeffrey Sprecher, the founder and chief executive of Intercontinental Exchange. Once a proponent of the UK’s decision to leave the EU, Sprecher has observed a decrease in the UK’s value as a trading centre since its exit from the single market. The ambiguity surrounding post-Brexit regulations has made it increasingly difficult for international companies to commit to investments in the UK.
Sprecher’s comments reflect a broader trend among international investors, who now view the UK with caution due to the compounded uncertainties of Brexit. The perception of the UK as a gateway to Europe has diminished, making investments in the US and other regions appear more straightforward and less risky.
Moreover, the UK’s historical reputation as a global trading centre has been complicated by Brexit. The shift in regulatory frameworks and the potential for divergence from EU standards pose additional hurdles for businesses looking to operate across borders.
This complexity not only deters investment but also challenges the UK’s ability to maintain its position on the international stage.
A post-Brexit reality
Brexit has undeniably transformed the UK’s economic landscape, making it a more challenging environment for productivity and investment. The combined effects of trade disruptions, labour shortages, and regulatory uncertainties have contributed to a decline in the UK’s economic performance.
As the UK continues to navigate its post-Brexit reality, the need for clarity and stability becomes ever more critical to regain the confidence of investors and businesses alike. The path forward will require a balanced approach, one that addresses the immediate challenges while setting the foundations for long-term growth and productivity.
And there are, of course, opportunities to be grabbed too – especially in emerging international markets, for businesses who are brave enough to shift their focus away from the EU and to the global marketplace instead.
For more help on doing just that, click here.
Research commissioned by the British Beauty Council has found that Brexit has severely impacted the UK beauty sector, with SMEs especially affected.
The research, conducted by Oxford Economics, found that customs delays, increased costs associated with cross-border trade and a reduction in skilled EU workers entering the UK economy have shrunk the value of the UK beauty industry’s exports into the continent by £850m.
The research looked at sales trends before and after the UK’s departure from the European Union and found that, whilst sales increased in 2010 and 2016, exports have been in decline ever since the Brexit vote.
Interestingly, export values from UK beauty firms into the global marketplace have remained steady – its EU sales which have declined.
Head of trade policy at the BCC, William Bain, noted that: “The reality is if UK business is to thrive, then we must export more, it’s as simple as that. If we want to remain one of the world’s largest economies, then we need more firms selling goods and services internationally.
“The pandemic, supply chain disruption, Brexit, non-tariff trade barriers and global headwinds have all made this more difficult over the past few years.”
Read more: Growing crisis for UK’s exporting industry
This report, although damaging for the impact Brexit has had on trade with the EU, highlights the advantages of setting corporate sights further afield.
By targeting a global audience rather than just within the Eurozone, UK firms have an opportunity to find new customers – potentially in territories where competition is lower, or there is huge demand for their products and services.
To find out how export-ready your business is, take a quick and free quiz right here and get an instant assessment report on areas you need to work on to start taking advantage of the global opportunities that are out there.
A straw poll as part of UK exporters has unearthed how unprepared most are for upcoming changes to the British border and how they will affect them.
Taken on an Institute of Export & International Trade webinar, just 6% of attendees said they were ‘completely clear’ about upcoming changes, whilst 16% said they were ‘clear’.
The question relates to the government’s Border Target Operating Model which sets out how the UK will approach checks on some goods entering from the EU – including several sanitary and phytosanitary (SPS) requirements.
The new border controls are designed to protect the UK against security and biosecurity threats and to ensure a smooth flow of goods, delivered as part of the 2025 Border Strategy.
Kevin Shakespeare of the IOE&IT noted: “There’s a lot going on in the trade and customs space in the UK. It can be a challenge to keep up, but there are also opportunities for businesses operating compliantly, that take the time to analyse and stay up-to-date on the changes.”
The 200-page document explains how the UK will adopt a digitised and risk-based approach to border checks with agencies conducting different levels of checks depending on the risk category of the product.
The same approach will then also be applied to non-EU goods entering GB.
IOE&IT customs specialist Anna Doherty further explained: “The impact of the model will vary depending on what you trade.
“For example, for exporters of SPS goods, the EU has been implementing controls right from the end of the transition period. To bring these checks into the UK will even out the playing field for these businesses.
“The model is also bringing in a range of simplifications. If you’re bringing in SPS goods from the rest of the world, then the modernisation in this regime will allow you to align your processes.”
Read more: Planned post-Brexit checks on EU food imports delayed again
UK importers and exporters have more to contend with too over the next 18 months, including the migration to CDS for exporters, a new NCTS5 system for transit, and the Windsor Framework.
Three key milestones that exporters need to know as part of the British Border Operating Model include:
- 31 January 2024 – The introduction of health certification on imports of medium-risk animal products, plants, plant products and high-risk food (and feed) of non-animal origin from the EU
- 30 April 2024 – The introduction of documentary and risk-based identity and physical checks on medium-risk animal products, plants, plant products and high-risk food (and feed) of non-animal origin from the EU. At this point, Imports of Sanitary and Phytosanitary goods from the rest of the world will begin to benefit from the new risk-based model
31 October 2024 – Safety and Security declarations for EU imports will come into force from 31 October 2024. Alongside this, we will introduce a reduced dataset for imports
If your business is yet to fully understand what upcoming changes mean for continued operations, Go Exporting can help you uncover the practical steps you need to make to remain compliant, continue seamless trade, and even spot an opportunity for growth.
Find out more about our customs and compliance reports, or get in touch directly here.
In a recent piece for The New Statement whilst discussing Peter Forster’s book ‘What went wrong with Brexit and what we can do about it’, Andrew Marr has highlighted how UK SMEs are struggling to export to the EU and are increasingly deciding not to.
He says there is an ongoing contraction happening as firms decide it is too difficult to trade with the EU, and new ‘sectoral deals’ may be required by future governments to create closer alignment.
In short, back into the Single Market, but without saying so. Watch Marr’s points below:
Still opportunities for international trade
Whilst doing business with the EU market has undoubtedly become more complex since Brexit, there are still fantastic opportunities for new and established UK businesses to expand their horizons and drive increased revenue through international sales.
For many, it’s just about knowing how to start.
Go Exporting helps companies like this to understand their readiness to export with a three-stage audit and additional strategy, including export viability and corporate goals, legal, customs and market research – as well as market entry strategies.
Learn more about our export readiness audits here.
The government has delayed plans to introduce checks on imported food products once again.
The post-Brexit checks on fresh farm produce and plants from the EU into the UK were meant to begin in October, however, concerns over supply chain readiness, delays and potential inflationary cost increases have seen the roll-out pushed back once more.
Industry bodies have welcomed the move, with the Cold Chain Federation noting; “UK food retailers, hospitality businesses and consumers were in line for major disruption because many EU food-producing businesses supplying into the UK are not ready for the new requirements.”
But some businesses have said that delaying the checks will give an unfair advantage to continental rivals as UK produce arriving in the EU are subject to checks.
When will checks begin?
There’s no date as to when the changes will be introduced, with some industry insiders telling the BBC that they don’t expect any additional checks to come into play before the next general election, in January 2024, for which it is unlikely any new government would immediately mandate checks begin either.
This leaves a prolonged period of limbo for supply chains and the businesses which rely on them. When should they invest in the updated processes and procedures necessary, and if they do, could that be money down the drain?
At a time when inflation is still stubbornly embedded in the UK economy, it is unlikely any policy will be forced through onto businesses that will undoubtedly cause an increase in consumer prices.
But the period of limbo is harming UK producers, with the director of trade at the National Farmers Union, Nick von Westenholz, saying UK farmers were facing issues with exporting but continental competitors could export into the UK at will.
He said: “We appreciate the need to protect consumers from rising food prices, but it is vital that we introduce proportionate, light-touch checks on all our food imports that keep costs for importers to a minimum while properly managing biosecurity risks.”
Get support with the new post-Brexit trading environment
It’s been a tumultuous time for UK businesses adapting to the post-Brexit trading environment with new processes, delays and costs to mitigate.
The continued delay on UK checks on EU produce is a great example of businesses having to exist in a state of perpetual uneasiness – huge changes on the horizon with major consequences, but no clear idea as to when those changes will come into play… and when they should start preparing for them!
At Go Exporitng, we help import and export businesses of all sizes to adapt to the ever-changing tides of international trade, and we can do the same for you.
Learn more about our Brexit consultancy services and how we can help you overcome the obstacles and actually benefit from the changes here.
Rishi Sunak’s new Windsor Framework was designed to do a few things. First and foremost was to fix the backstop issue in the original Brexit deal and remove the border down the Irish sea. And second, it was supposed to unlock talks with the Biden administration over a new, lucrative ‘Brexit dividend’-worthy trade deal with the US.
And the latter looks to have worked… to a degree. The White House suggested to the UK government this week that it would now be open to starting talks over a trade deal again – but not until 2025.
That timeline is only likely to accelerate should Biden lose in the 2024 US elections, if he decides to run for another term. If Biden is reelected, then 2025 could be pushed back further as he battles with those on the left of his own party who are concerned at the number of US jobs being lost overseas.
Conservative MP David Jones told The Telegraph that: “The US can remain on the back-burner until we have a more sympathetic US President.
“Indeed, it was rumoured that Biden himself was keen [for the US] to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership [CPTPP]. If that happens, we will not need a bilateral deal.”
Read more: UK to join £11 trillion CPTPP trading bloc
“In the meantime, we can focus on more enthusiastic trading partners, who are accounting for an increasing share of the global economy.”
Anyone trading with or from Northern Ireland since Brexit will be aware of the increased difficulties and effective border down the Irish Sea. It’s an issue which has been a constant bone of contention, especially with Northern Ireland politicians, leading to the collapse of the Stormont Assembly after the DUP withdrew.
Rishi Sunak, the UK Prime Minister and Ursula von der Leyen, President of the European Commission announced the so-called Windsor Framework on 27th February, hailed as the solution to the issues and a victory for common sense. But what does it mean for international trade? Will it actually improve the situation for UK-NI traders without closing the border between NI and the EU?
One of the key wins is the Green Lane/Red Lane idea where goods from the rest of the UK destined for Northern Ireland will follow a Green Lane, with a separate Red Lane for goods destined for or at risk of ending up in the EU. It has been publicised as if the Green Lane will have virtually no paperwork and movement of goods to NI will be like before Brexit.
As ever the devil is in the detail. There will in fact still be paperwork requirements for traders, albeit at a significantly reduced level. There will still be around 25 datapoints required. This is not being called a Customs Declaration, but some would argue in effect that is what it will be. Goods in the Green Lane will not be subject to systematic checks, though the facility for spot checks is there.
Parcels will not be subject to full customs declarations but from 2024 the parcel operators will be required to share data with the EU to manage smuggling risks.
Current bans on certain products like chilled sausages entering Northern Ireland as a result of EU law will be lifted, meaning anything available in UK supermarkets will once again be available in Northern Ireland. New labelling arrangements will come into force for some goods. UK VAT and Excise Duties will once again apply in Northern Ireland for alcoholic drinks for immediate consumption.
Northern Ireland retailers will have to qualify as trusted traders to benefit from the reduced paperwork, however. Rishi Sunak explains:
“It means food retailers like supermarkets, restaurants and wholesalers will no longer need hundreds of certificates for every lorry,” Sunak said. “If food is available on supermarket shelves in Great Britain, then it will be available on supermarket shelves in Northern Ireland.”
Personal, online shopping and business-to-business parcels sent from Britain into Northern Ireland “will have to complete no customs paperwork”, he said.
Download now: Checklist for exporting from the EU to the UK post-Brexit
Bans on seed potatoes and 11 types of native UK trees will also be lifted. Medicines approved in the UK will automatically be available in Northern Ireland. This is a major boost for pharmaceutical companies in the UK and the NHS.
Goods moving from NI to the rest of the UK will not require paperwork.
On the face of it, this is a good agreement for Northern Ireland, keeping its foot in both the UK and EU with it seems the minimum of bureaucracy. Yet could all be about to implode?
A key element of the framework is the so-called Stormont Break, designed to give the Northern Ireland Assembly a say on how EU laws are applied in Northern Ireland. It can effectively put a brake on new laws being implemented.
Read more: New Northern Ireland framework could unlock US trade deal
The DUP has indicated that it will oppose this element of the framework in a House of Commons vote on 22nd March 2023. If they do, then the future of the overall agreement could be in doubt. The bill will still pass on Wednesday as it has Labour support, but ultimately the DUP must be convinced in order to restart the power-sharing executive in Northern Ireland which has failed to sit for over a year.
Watch this space!
UK Prime Minister Rishi Sunak and President of the European Commission Ursula von der Leyen displayed what has become an increasingly uncommon showing of UK/EU cooperation and agreement late last month with the announcement of the breakthrough Windsor Framework.
The new deal for Northern Ireland fixes many of the problems that the previous protocol had thrown up for both businesses and individuals.
If agreed upon and enacted into law, some of the key takeaways for UK firms include:
- Green and red lanes for trade, with green lane goods destined for NI requiring significantly fewer checks and less paperwork, whilst red lane goods at risk of moving into the EU requiring normal checks
- New data sharing and labelling arrangements (TBC)
- Goods moving from NI to GB will not require export declarations
- Specific GB products like potato seeds and sausages will once again be sold in NI
- Updated rules on pets, parcels and medicines too
Breakthrough could reignite US trade deal talks
Both Trump and Biden have been outspoken in their ‘disappointment’ at the state in which Northern Ireland was left as a result of the old protocol… and that disappointment actively put a blocker on talks towards a mega trade deal between the two nations.
The announcement of the Windsor Framework was greeted warmly by the current President who noted its importance in upholding the Good Friday Agreement.
A White House source then hinted towards wider benefits, noting that: “We believe that this will help improve the prosperity of both the EU and the UK, and will open up all kinds of new avenues for trade that were somewhat at risk.”
Download now: Post-Brexit planning checklist
The government had been hoping for a swift trade deal to be agreed upon with its largest ally in the wake of the Brexit vote and has since opted instead to pursue economic arrangements with individual States.
New developments could mean a more comprehensive agreement is back on the table, whilst talks for the UK to gain access to the CPTPP could also be reignited.
The Trade and Co-operation Agreement (TCA) between the UK and EU in the wake of Brexit is delivering more headaches than benefits for the majority of exporting SMEs.
That’s according to data collected in December last year by the British Chambers of Commerce from almost 1,200 surveyed businesses.
The survey found that almost eight in 10 firms had found the Brexit deal was not helpful in their drive to increase sales or grow their business overall, whilst more than half continue to face difficulties adapting to the new rules for trading goods.
Download now: 7 key changes to UK-EU trade post-Brexit
Meanwhile, 45% of service businesses said they’re still trying to adapt, whilst over four in 10 said they’re finding it difficult to obtain visas for new staff.
These difficulties are directly translating into business performance too.
The survey also found that 80% of firms are seeing the cost of importing increase, whilst more than half have seen their margins cut. Three-quarters of manufacturers also said they’d had issues with shortages too.
One manufacturer commented on their experience that: “Brexit has been the biggest ever imposition of bureaucracy on business.
“Simple importing of parts to fix broken machines or raw materials from the EU have become a major time-consuming nightmare for small businesses, and Brexit-related logistics delays are a massive cost when machines are stood waiting for parts. We used to export lesser amounts to the EU, but the bureaucracy makes it no longer worthwhile.”
To help alleviate some of the issues UK businesses are facing, the British Chamber suggested five fixes that the government should look to introduce:
- Create a supplementary deal with the EU that either eliminates or reduces the complexity of exporting food for SMEs.
- Establish a supplementary deal, like Norway’s, that exempts smaller firms from the requirement to have a fiscal representative for VAT in the EU
- Allow CE-marked goods and components to continue to be used in Great Britain after 2024.
- Make side deals with the EU and member states to allow UK firms to travel for longer and work in Europe.
- Reach an agreement on the future of the Protocol on Ireland/Northern Ireland with the European Commission in the early months of 2023, to stabilise our trading relationship.
If your business is suffering as a result of Brexit, combined with current global economic headwinds, then Go Exporting can help.
Our international trade consultancy helps businesses of all sizes to expand into new markets, from research and strategy to full export implementation and sales generation.
Learn more about how we can support your company here.
New data has highlighted how a range of global economic factors are hampering growth efforts for small and medium-sized exporters.
Data from more than 2,300 UK SMEs as part of the British Chamber of Commerce’s quarterly Trade Confidence Outlook for Q4 found that just one in four had seen international sales growth at the backend of 2022, with a further 47% saying sales had stagnated if not fallen.
The picture for 2023 looks equally stagnant too with 28% expecting a sales slump against 24% saying they could see an increase in demand.
Total revenues are expected to rise though as cost pressures and shrinking margins mean 64% of respondents are planning to increase pricing over the coming months.
Difficult business environment
Consumers and businesses alike have struggled in the post-pandemic era to really kick on once more with the cost of living, inflation and economic headwinds driven by the war in Ukraine contributing to a trading environment some are finding more difficult than during the lockdowns.
Additional factors such as Brexit have made it tougher, and more expensive, for UK firms in particular to access the EU market.
Respondents to the BCC survey noted that energy (72%), labour (67%) and raw materials (61%) were the biggest cost pressures being faced – three critical areas that it’s hard to mitigate against.
Head of policy at the Chamber, Willian Bain, said of the survey results that: “Last autumn the World Trade Organisation forecast global trade growth of just 1% in 2023, down from 3% in 2022. This is creating huge headwinds for smaller UK firms battered by the pandemic, Brexit and energy price shocks.
“Against this background, it could be some time before the global shipping and trading systems return to anything approaching normality.
“The UK government cannot afford to sit idly by as we head into such uncertain trading conditions. It must throw a lifeline to our struggling exporters who are desperately trying to keep their heads above water.”
Download now: 7 key changes to UK-EU trade post-Brexit
Bain continued: “Outside of the EU, the US is our biggest trading partner, and the one that BCC members are most interested in, yet progress on free trade talks are stalled. As the Good Friday Agreement anniversary looms the UK has a golden opportunity to transform our trading relationship with our two biggest export markets in one fell swoop.
“Other measures Government should consider include providing effective end-to-end trade finance and setting up a trade accelerator – by working alongside our global network to help firms enter new markets and maximise sales.”
