For UK businesses, Brexit meant higher costs and endless forms



For over a decade, Neil Currie was able to sell his company’s handcrafted black iron pots and pans and cookware in Shropshire, the birthplace of the British Industrial Revolution, to customers in Berlin as easily as he could. to those in Birmingham, less than 30 miles to the east. But this year, since Britain left the European Union, sales of Netherton Foundry in the bloc have plummeted.

For the past 12 months, UK businesses have faced the reality of the country’s decision to distance itself from its biggest trading partner. Initially, the new system collapsed: Perishable goods got stuck in ports, retailers discovered their supply chains were outdated, and trucking companies stopped delivering throughout the island of Ireland.

The worst problem (outside of Northern Ireland) eased after a few months. But what remains is a frustrating regime of higher costs, tedious customs formalities and countless lost opportunities.

Sales of the Netherton Foundry website to the European Union are “running out,” Currie said. They have fallen 40 percent this year.

Before Brexit, the only noticeable difference in sales on the continent was the additional delivery costs. The organization of the expedition took less than a minute. Now, for every different product leaving Britain, whether it’s a specially designed tortilla press or a popular frying pan with locally sourced oak handles, a four-page customs form. must be completed, which takes up to 20 minutes per shipment.

For customers, there is the shock of the stickers. Items cost at least 8.50 pounds ($ 11.25) more, as couriers charge additional fees to cover additional administration of customs checks and taxes. And each product takes longer to reach its destination. Besides the lost online sales of individual shoppers, many independent stores across Europe that stock Netherton Foundry’s products have concluded that it is just not worth the cost or the hassle.

“We can sell to people, we can do it, but it’s more expensive,” Mr. Currie said. “But there is a perception – and I think it might be even worse – that it is too difficult.”

In its first seven months, the new trade deal cut UK exports to the Union by 14% and imports by 24%, according to an estimate by the UK Trade Policy Observatory, a research group. This represents around £ 44 billion in trade losses. Most exports were lost in January as many logistics companies stopped moving goods, overwhelmed by the number of deliveries sent with inaccurate customs documents. Since this initial decline, exports have mostly recovered, according to official statistics.

But data doesn’t capture how hard companies have to work just to keep the customers they have as they become less competitive.

One of the biggest customers of Netherton Foundry, a large store in Germany, demanded that the pans be sold to him through a middleman in Belgium so he didn’t have to do the extra work of importing directly from Great- Brittany. “With, of course, all the extra costs,” Mr. Currie said. “We all know this is crazy.”

The trade agreement granted goods made in Great Britain duty-free and quota-free access to the European Union. But the documents required to cross the border and prove that the goods met the bloc’s regulatory standards have become a nuisance. Some companies decided that it was not worth the additional costs. Marks & Spencer, a large UK retailer, has closed its 11 food stores in France, citing the “supply chain complexities” created by Brexit.

Merchandise trade with Europe was almost 16% lower than it would have been in a world without Brexit, according to the latest report from the Center for European Reform, a group that supports the European Union.

These are just the beginnings of the long-term impacts of Brexit, which is expected to shrink the UK economy by 4% compared to what it would have been otherwise, according to the Office for Budget Responsibility. That’s twice as many scars on the economy than the pandemic is expected to cause, he said.

“We’ve had a year of two halves,” said Sally Jones, who heads the trade and Brexit strategy team at EY. At first, companies were asking granular operational questions about how to continue to operate under the new rules. Now they are working on long term issues that require substantial change. For example, some retailers who relied on a single European distribution center in Britain are finding that they cannot afford to continue paying the additional tariffs imposed by repatriating imported goods out of Britain. They plan to open other centers on the continent, relocate jobs and money.

This is something Luceco, which manufactures and imports lighting and wiring products from China and sells them to retail stores, needs to consider. It mainly sells products imported to Great Britain, but around £ 3-4million of sales are made in the Republic of Ireland.

“Fortunately, it’s not the biggest chunk,” said Matt Webb, chief financial officer. But “it was extremely difficult. The paperwork now involved in selling even to Northern Ireland is prohibitive, ”he said. In addition, tariffs on items must be paid twice: when entering Britain from China and leaving for Ireland.

“There always came a time when it made sense for us to have a hub in Ireland,” said Mr. Webb. “Everything Brexit has done is a little closer to that day.”

The additional costs and challenges of Brexit have arrived as companies already desperately try to navigate the constant uproar of the pandemic, which has resulted in international shortages of goods, sky-high transport costs and soaring commodity prices, especially for energy.

At Netherton Foundry, the first thing that hits Mr. Currie’s inbox every morning is an email from his purchasing manager listing the top five expenses that have gone up in price overnight. Luceco is also seeing increases: previously it was spending £ 2million a year on sea containers transporting its goods from China. Now it’s £ 16million. For customers, Luceco’s prices jumped 12%.

Recently, butter and cheese prices have risen by 20 to 30 percent, said Michael Harte, managing director of Bridge Cheese, which imports some of its cheeses from Europe and sells tailor-made mixes to food manufacturers and to wholesalers, such as pizza companies, in Great Britain. , on the continent and in the Middle East. And we have to deal with soaring energy prices. Bridge Cheese absorbed these extra costs for as long as it could, but since September has passed double-digit price increases to its customers.

“Unlike the singular problems, it all overlaps,” Mr. Harte said.

In order to keep Brexit costs under control, Bridge Cheese is only willing to export large orders, as goods destined for the European Union must now all undergo veterinary inspections to certify that they comply with health regulations and for check labeling and storage. It costs as much to have 20 pallets inspected as it costs to have one, Harte said.

One of his frustrations is that Brexit means there is a “massive market on your doorstep” that cannot be competitively reached for specialty products, he said. In the nine months to September, exports of food and drink products to the European Union fell 14% from the previous year, according to an industry group. Cheese exports fell 13%, he said.

And there are other impacts of Brexit to come. From January 1, Britain will impose customs controls on goods imported from the bloc. Also in the new year, companies will have to prove that their products are made enough in Britain to qualify for duty-free trade. From the middle of next year, additional border controls for exports, including physical inspections of plant and animal products, will begin.

As the UK government insisted on the success of its European trade deal, it was keen to shift the focus of business towards promises to trade with countries further afield. The real opportunities lie in the Indo-Pacific, officials said.

Businesses have sought out customers further afield, but out of necessity, not choice. Since the start of the year, sales of Netherton Foundry in the United States have increased, but they have not made up for lost sales in Europe.

Some specialty retailers in Europe remained customers, but everyday kitchen stores did not, Currie said. A dedicated cohort of individual customers also remains. Many of them are “true anglophiles,” he added.

“But we have to lose a lot of people who are slightly indifferent to us,” he said. “These are the lost opportunities that we have right now, and they are difficult to measure.”

Previous Inflation and the supply chain
Next Tariff quota system to 'replace' Article 232 tariffs on eligible EU steel and aluminum products from January 1, 2022: What importers need to know to maximize the chances of realizing savings substantive rights | Dentons