The Department for Business has confirmed that the UK will follow World Trade Organisation (WTO) rules regarding subsidies following the end of the transition period, replacing EU state aid laws from January 1st.
The rules will cover financial assistance granted by governments and public bodies to businesses, something which has become a sticking point during the latest round of EU/UK trade deal talks.
The WTO subsidy rules are internationally recognised as the common standard, covering financial assistance given to private firms. However, unlike EU member states, most other advanced economies don’t have rules regulating these subsidies – beyond those set by the World Trade Organisation.
Currently, the European Commission policies state subsidies to businesses to ensure no distortion of competition regulations between EU member states within the single market – something which the UK will no longer be bound to next year – allowing the creation of its’ own subsidy control regime.
Yet despite having more freedom in this area, business secretary Alok Sharma said the government has no plans to return to a 1970’s approach of trying to run the economy or bailing out unsustainable firms.
He said that: “We want a competitive, dynamic market economy in which we can back British industries to create more jobs in this country, while also making the UK the best possible place to start and grow a business.
“While our guiding philosophy remains that we do not want a return to the 1970s approach of picking winners and bailing out unsustainable companies with taxpayers’ money, the UK must have flexibility as an independent, sovereign nation to intervene to protect jobs and to support new and emerging industries now and into the future.”
Read more: Johnson gives trade deal ultimatum as Barnier sets to touchdown for next round of talks
“As we take back control of our money and laws from the EU, we have a unique opportunity to design our own subsidy control regime in a way that works businesses, workers and consumers.
“Over the coming months, I want to work closely with businesses and public authorities across all parts of the United Kingdom to consider how best we can use these new freedoms.”
Further guidance will be published before the end of the year.
Prime Minister Boris Johnson has upped the stakes on the eve of the eighth round of trade talks between the UK and EU by stating that a lack of a free trade deal agreement by mid-October would mean no trade deal.
Brexit is very much back on the agenda with a bump as EU diplomats explained their irritation at the UK’s stance, slightly dismissing it as ‘muscle-flexing’ and ‘self-defeating’ as talks enter the final weeks.
Two key issues remain which neither party is looking likely to make concessions over – that of access to UK fishing waters and rules regarding government intervention in struggling businesses.
In a statement on Facebook, Johnson stated that: “We are now entering the final phase of our negotiations with the EU.
“The EU have been very clear about the timetable. I am too. There needs to be an agreement with our European friends by the time of the European Council on 15 October if it’s going to be in force by the end of the year. So there is no sense in thinking about timelines that go beyond that point. If we can’t agree by then, then I do not see that there will be a free trade agreement between us, and we should both accept that and move on.
“We will then have a trading arrangement with the EU like Australia’s. I want to be absolutely clear that, as we have said right from the start, that would be a good outcome for the UK. As a Government we are preparing, at our borders and at our ports, to be ready for it. We will have full control over our laws, our rules, and our fishing waters. We will have the freedom to do trade deals with every country in the world. And we will prosper mightily as a result.
“We will of course always be ready to talk to our EU friends even in these circumstances. We will be ready to find sensible accommodations on practical issues such as flights, lorry transport, or scientific cooperation, if the EU wants to do that. Our door will never be closed and we will trade as friends and partners – but without a free trade agreement.
“There is still an agreement to be had. We will continue to work hard in September to achieve it. It is one based on our reasonable proposal for a standard free trade agreement like the one the EU has agreed with Canada and so many others. Even at this late stage, if the EU are ready to rethink their current positions and agree this I will be delighted. But we cannot and will not compromise on the fundamentals of what it means to be an independent country to get it.”
Read more: Brexit deal ‘seems unlikely’ this year
Earlier, the UK’s lead negotiator David Frost told the Mail on Sunday that the UK was more than ready to walk away from negotiations.
“We came in after a Government and negotiating team that had blinked and had its bluff called at critical moments and the EU had learned not to take our word seriously,” he said.
“So a lot of what we are trying to do this year is to get them to realise that we mean what we say and they should take our position seriously.”
The Government is being urged to make good on its’ manifesto pledge to stop the exports of live animals with Brexit affording the best opportunity to push through the relevant regulations.
Up until now, EU laws have stopped the UK banning live exports, and the RSPCA, as well as Conservative ministers, are urging the Government to make the change.
Head of public affairs at the RSPCA, David Bowles, said that: “Leaving the EU is the best chance we have had so far to end the live export trade which causes so much unnecessary suffering to animals.”
Each year, tens of thousands of live animals are exported from the UK to make journeys across Europe, something which ministers are urging action on with lengthy journeys leading to injury, overheating and extreme stress in cramped conditions.
Theresa Villiers, former environment secretary said that leaving the EU is the best chance to take action.
Read more: Trade between UK and EU won’t ‘collapse overnight’ without agreement
She said that: “Now we’re heading for the end of the transition period, we have the opportunity to take action.
“There are some serious legal complexities to be tackled, but there is a clear moral case to end live exports.
“We need to live up to our manifesto commitment on this and restrict excessive long-distance transport of live animals so overseas exports become a thing of the past.”
The latest round of Brexit negotiations has seen talks going backwards according to reports, with EU chief negotiator Michel Barnier saying the chances of striking a deal before the end of the year are looking ‘unlikely’.
With the countdown to the end of the transition period ticking on, the EU has warned that UK negotiators have taken discussions backwards, with issues surrounding fishing and rules surrounding competition seemingly to be two of the main stumbling blocks around the negotiating table.
However, Boris Johnson has urged talks to ‘rapidly accelerate’ over fears of a cliff-edge Brexit – especially on the back of the economic damage seen so far by the coronavirus pandemic.
Barnier has said he is surprised and concerned by the lack of progress, commenting that ‘too often this week t felt as if we were going backwards more than forwards’.
BBC Brussels correspondent Nick Beake believes that both the EU and UK are locked in a last-minute power play, writing that ‘the latest round of discussions were courteous and friendly – with a warmth between the two chief negotiators facing each other – even when each was delivering an uncomfortable message’.
“As ever, the EU and UK are hardly seeing eye-to-eye though.”
However, one UK negotiator has suggested it is the EU that are holding up talks by insisting on agreeing to specific elements of the deal before progressing.
An official commented that: “The process block now is the EU’s insistence that we must accept their position on state aid and fisheries before we can talk about anything else. I mean obviously we’re not going to do that. So it’s frozen.
“Things are focussing down, not necessarily helpfully, on the issues of state aid, subsidy policy and fisheries policy. What’s frustrating here is that Michel Barnier said in his press conference just now, ‘Brexit means Brexit’, which is of course correct. They don’t apply that in this area where they want to see us continuing arrangements that are very like those that we’re bound by as members of the EU.”
Read more: Trade between UK and EU won’t ‘collapse overnight’ without agreement
With the seventh round of talks over, the next phase of negotiations will take place in London next month with just weeks left until the initial Autumn deadline to complete a deal.
An economist has reminded those fearing the consequences of a no-deal Brexit that trade won’t simply ‘collapse overnight’ if no agreement is reached before the end of the transition period.
Catherine McBride has noted that demand from both businesses and consumers will continue to drive trade and investment between the two sides – though that trade would likely become more expensive with the introduction of tariffs.
She said: “The idea that trade or financial ties between the EU and the UK would ‘collapse overnight’ without an agreement is not something you would expect to read in the financial media.
“Trade agreements do not generate trade – consumer demand, and business suppliers do.
“Trade agreements can make trade easier but if consumers want to buy something, then that demand will be supplied with or without a trade agreement – even if the product is banned by the government.”
“At the very worse, if tariffs are added to products crossing from the EU into the UK and vice versa, then EU-UK trade would merely become more expensive.
“But this would be a bigger problem for the EU than the UK because the UK is a net importer of goods from the EU. It is the UK that provides a lucrative market for EU merchandise.”
Read more: Barnier warns ‘changes are inevitable’ on release of Brexit guidance dossier
Trade negotiations are ongoing but are being hindered by the time and energy required to combat coronavirus with many rounds of talks held over conference and video calls. And while the UK government has struck a number of trade deals with smaller nations, bigger agreements with the US and also Japan, where talks have been held up with a row over cheese, are ongoing.
The former head of the World Trade Organisation has warned that a no-deal outcome to Brexit negotiations could relegate the UK from the top tier of world trade.
Pascal Lamy, who headed the WTO between 2005 and 2013, commented in a discussion with CoronaNonics that the UK faces a stark choice between minor or great trade relationships with the EU bloc.
Lamy said that: “Is trading between UK and EU under WTO terms a good thing or not? It depends on which league you want to play soccer.
“If you like the game and if you like very good players you will go to the first league. If you have less money to spend or if you’re not such a big fan, you can watch the match of the second, third, fourth league.
“It’s still soccer, it still is trade, but it’s a minor version of what could be great.”
Read more: Barnier warns ‘changes are inevitable’ on release of Brexit guidance dossier
He continued that; “It’s not governments that trade. It’s businesses and that their lives will be terrible in case there is no serious transition between the nirvana of the internal EU market, which is where the EU-UK economy is for the moment, and anything which will be much worse than that.
“It shouldn’t be much worse than that, but it’s going to be much worse without a proper transition organised.”
You can watch the episode below:
Talks between the EU and UK are ongoing, whilst the government has made progress in negotiations with other nations to secure trade agreements, including most recently with Japan.
Read more: Just one in four businesses fully prepared for Brexit with five months to go
However, with the financial damage caused so far by Coronavirus expected to be longer-lived than initially thought, the fear for both British and European businesses which rely on free and easy-access trade between each other is that a no-deal scenario could be a step too far for many firms struggling to survive.
What is critical is that businesses prepare as best as possible. Find out how Brexit-ready your firm is by downloading our free Brexit Planning Checklist here.
The EU’s chief negotiator, Michel Barnier has warned European businesses that changes are inevitable as the countdown to the end of the transition period ticks on.
He’s told both companies and citizens that they need to prepare for the UK’s departure from the single market and that, deal or no deal, changes to way of life and doing businesses will take effect from January 1st next year.
He commented that: “The Brexit transition ends on December 31. In five months, the UK leaves the EU’s single market and customs union. Changes are inevitable, with or without an agreement on the new partnership. Companies and citizens must get ready.”
The warning carries particular urgency as Brexit could ‘risk compounding the pressure that businesses are already under due to the Covid-19 outbreak’.
Barnier’s warning comes as The European Commission issues a 39-page dossier of preparations that businesses and citizens need to make before the end of the year, giving guidance on how trade will be affected for firms, and also travel changes for tourists.
Read more: Just one in four businesses fully prepared for Brexit with five months to go
Is your business fully prepared for Brexit? A new study from the Institute of Directors has found that half of all UK firms aren’t currently able to prepare for the departure from the single market due to a combination of coronavirus and lack of clarity on what they need to do from the government.
To help, Go Exporting has created a 21-point Brexit Planning Checklist which companies can download and work through, providing a detailed planning guide and covering all the major areas that will be affected by Brexit.
A new study has shown how just one in four UK businesses is fully prepared for Brexit – despite the transition period set to end in just five months time.
Released this month by the Institute of Directors, nearly half of the 1,000 companies they surveyed said they weren’t able to prepare despite the ticking clock, with one in seven saying the coronavirus had distracted them from Brexit preparations.
Worryingly, a third of businesses said they still needed more clarity on what they need to do before acting.
Companies in the financial services sectors are currently best prepared according to the survey, whilst manufacturing – which relies so heavily on free and quick access for imports and exports – still has some way to go.
Further reading: How Brexit may impact the UK manufacturing sector (opens in new tab)
Interestingly, UK businesses seem to be more confident that they could well mitigate any impact of a no-deal scenario, but recognise that the UK economy is in dire need of a trade agreement with the EU – especially in-light of events so far this year.
When asked how important it is that the government reaches a deal with the EU, 34% said it was very important for their organisation, whilst 65% said it was key for the economy.
Director of the IoD, Jonathan Geldart, commented on the survey findings that: “With so much going on, many directors feel that preparing for Brexit proper is like trying to hit a moving target. Jumping immediately into whatever comes next would be a nightmare for many businesses.
“A commitment to some form of reciprocal phasing-in of changes once clear is a long-standing ask from our members, and the benefits would be significant. At a time when government is rightly straining every sinew to help firms deal with widespread disruption, it would be counterproductive not to seek to minimise it at the end of the year.
“Unilateral actions like staggering import controls would be a welcome step from Government, but are by no means enough, we need to mitigate disruption across many different sectors on both sides. A phased implementation is in everyone’s interests, and direct financial support for smaller firms would be a huge boost at a difficult time.”
Read more: Brexit: the greatest business opportunity for a generation?
He concluded that; “Directors want to take advantage of the opportunities that can come with an independent trade policy. They want to start this exciting new chapter on the front foot, not distracted by disruption.”
How prepared for Brexit is your business? At Go Exporting, we’re supporting companies to understand where the threats and opportunities of the UK’s departure from the European Union lie with free Brexit planning checklists and detailed business audits.
Find out more about our Brexit consultancy services here.
We hear a constant stream of news and expert opinion about the significant challenges Brexit will bring to UK exporters, it almost feels like a doomsday scenario! Yes, we need to be prepared and there will be changes to the way we do business, but what about the opportunities?
There are not a lot of column inches or posts on social media looking at the positives, yet potentially they are equally significant. The Government is now free from the restraints of the EU and can make decisions based purely on what’s best for UK business.
Many UK businesses, if they export at all, have only contemplated the EU up to now. That is understandable as they are our near neighbours and until 31st December our partners. Exporting to the EU is easy with free movement of goods and simplified VAT procedures for example. Selling to France is almost the same as selling to Sheffield.
From next year we become just another third-party country and subject to the same customs rules and regulations as any non-EU country. The extent to which there will be duties and red tape depends on if we reach an agreement with Brussels in time. The indications are not good and the strings they try to attach may be too much for the UK Government to agree.
So, ok every business is going to have to learn how to complete customs declarations, how to prepare all relevant paperwork and follow the new rules. It’s a learning curve but it’s not insurmountable. There are plenty of training courses out there and the Government is providing grants to ensure the cost is not a burden. You can also use a Customs Broker to take the hassle away if you so choose.
We should look at this process as a positive. There’s no going back, so prepare and then move on. We will all now have new skills, knowledge and experience of exporting which will prepare us to broaden our horizons. We will have been taken out of our EU comfort zone and into a world of opportunities. Suddenly, from a procedural perspective, it is much the same process to sell to the US, China and Japan as it is to sell to France or Germany.
Stop thinking EU and starting thinking World!
There is a huge world of opportunities out there for you to consider. Broaden your horizons and look to expand your business in ways you perhaps never considered previously.
But don’t just rush in. Consider carefully which countries to focus on. What is the size of the market? What are the barriers to entry? How do you assess and compare different countries? Exporting needs to be approached in a strategic, planned manner so as to find the right opportunities, avoid the costly mistakes and blind alleys.
Download our ‘7 Steps to Export Success’ ebook for a step by step guide to becoming a successful exporter. It will take you through the process we use with clients to identify and prioritise target countries and define the best route-to-market strategy.
The first step is to narrow down the Where?
Which countries provide sufficient opportunity for you to target? Look at any market research you have readily available, review your in-house data for where your enquiries and customers come from, see where your competitors sell and a key consideration in the post Brexit era will be to follow closely the development of Free Trade Agreements between the UK and other countries or regions, the EU included.
Free Trade Agreements are designed to facilitate and promote trade between the parties, to ease the process, reduce or eliminate tariffs, cut red tape. As such they a good sign post to which areas to consider closely in your export planning. Details of agreements under discussion and already agreed can be found at https://www.gov.uk/guidance/uk-trade-agreements-with-non-eu-countries
Once you have narrowed down the Where? to the main potential markets, the next task is to prioritise and match your ambitions to your resources. It’s no use targeting the world if you only have one person in export and are running at 95% production capacity! Focus in the right areas is the key.
To set priorities it is necessary to evaluate the Barriers to Entry in each country. Look at product approvals, competition, currency, language, freight costs, customs regulations, duties, country risk etc.
When we carry out this process on behalf of a client, we consolidate all of the above information into a scoring system, weighting each barrier to entry for importance and assessing the pros and cons, the potential versus the risk. This is used to give a numerical rating for each country which allows us to compare the opportunity in different countries in a scientific rather than gut feel manner.
It’s a process which can take time and effort but ultimately can save thousands in helping you make the best-informed decision possible.
So, forget the doomsday scenario, think past Brexit and Covid-19. Look to the future, to the opportunities, to the profits and the adventures!
Go Exporting is a specialist consultancy helping companies just like yours to expand in international markets. For a free consultation on the help and support you need to open a world of opportunities see https:/goexporting.com, email mike.wilson@goexporting.com or call +44 (0)800 689 1423.
Online service providers need to start preparing for an end to the UK’s inclusion in the eCommerce Directive following the conclusion of the transition period between the UK and EU.
The eCommerce Directive is a set of rules relating to online activities within the European Economic Area and allows member states to operate in any EEA country – whilst only having to operate within the rules of the country in which they’re based.
However, once the transition period ends on 1st January 2021, this directive will no longer cover UK traders.
The government is advising that businesses still wishing to sell online within the EEA consider whether their services ‘are currently in scope of the Directive and if so, ensure that you are compliant with relevant requirements in each EEA country you operate in’.
Many online services provided by businesses may already comply with these requirements, but it’s worth checking now and making the appropriate changes if required before the end of this year.
“The government intends to fully remove the eCommerce Directive’s Country of Origin principle from UK legislation, to bring EEA online service providers in scope of UK laws, which they were previously exempt from. As this principle is found in a number of pieces of legislation it will be removed at different points, when parliamentary time allows.”
Four steps to check compliance
The government has set out four steps to help businesses understand where they stand. They are:
- Check whether you are in scope: the eCommerce Directive applies to ‘information society services’, which covers things like payments, providing a service that can be used remotely and so on, These cover the majority of online service providers, including online retailers, video sharing sites, search tools, social media platforms and internet service providers.
- Check where your service is based: This is your ‘place of establishment’ and is fixed to where you pursue your economic activity.
- Check for new legal requirements: If your business is established in the UK, you should check for the legal requirements of an EEA country you currently and wish to continue operating in. Rules you need to pay attention to are those that fall within the ‘coordinated field’ and cover items including online information, advertising, shopping and contracting.
- Take appropriate steps: The government also recommends ensuring you have processes in place for ongoing compliance with individual EEA states and consider legal or other professional advice.
Key further reading:
For support with your ongoing Brexit planning, you can speak to Go Exporting for a full readiness audit and to understand the threats and potential opportunities that Brexit can service for your organisation. Learn more about our Brexit consultancy.
