Results from the first major business survey for 2021 by the Chambers of Commerce on Brexit found that half (49%) of exporters are facing difficulties in adapting to the changes in the trade of goods following the ratification of the UK-EU Trade and Cooperation Agreement (TCA) on 1 January 2021.
The survey sought to understand the extent to which businesses found it easy or difficult to adapt to changes in trading goods and/or services and moving people in the month since the ratification of the TCA. Businesses reported the highest proportion of difficulties in adapting to changes in trading goods.
The survey found that:
- Overall, around a third of respondents (30%) reported difficulties adapting to changes to moving or trading goods in the first month of the year, while 10% said they had found adapting to the changes easy. 45% said trade in goods was not applicable to their business, and 16% said it was too early to say
- However, the percentage facing difficulties in adapting to changes in trading goods rose for exporters, where half (49%) reported issues, as well as manufacturers, where the percentage facing difficulties was more than half (51%)
- Overall, 14% of firms said that they faced difficulties in adapting to changes in the trade of services. 10% said they had found adapting to the changes easy. The percentage facing difficulties rose for exporters, where 21% reported issues.
When asked about the specific difficulties businesses were facing, commonly cited concerns included increased administration, costs, delays, and confusion about what rules to follow.
Underneath the overall figures, firms’ concerns fit broadly into three areas:
- First, difficulties arising from the challenges adjusting to the new arrangements, such as the sheer volume of paperwork and significant new costs of adjusting to those
- Second, issues about how new rules have been implemented, such as new customs arrangements
- Third, core provisions of the TCA which are currently of significant concern to businesses, such as on Rules of Origin and VAT.
Taken together, and on top of decreased revenue and cash flow as a result of the pandemic, this is a difficult moment for exporters. Some tell us they will respond to the challenges by switching away from international trade or by moving their operations overseas.
The Government needs to respond to this risk by removing every barrier they can.
We are now calling on the UK Government, and where necessary with EU partners, to:
- Work with us and the Chamber network to identify the most significant blockages for business and immediately publish plans for resolving those problems
- Create tax credits allowing firms to offset their spending on adaptation to the new UK-EU requirements against their tax bill, helping businesses navigate new burdens and requirements better
- Push back the imposition of additional SPS checks (from April) and full customs checks (from July) on imports into the UK. Sanitary and Phytosanitary (‘SPS’) checks are scientific tests on animal and plant goods
- Look at key areas of the new relationship and work with EU partners on easements to minimise unhelpful burdens, including on aspects of Rules of Origin and VAT.
There is absolutely no doubt in my mind that really good successful trading businesses - and the UK’s chances at a strong economic recovery - are being hit hard by changes at the border.
The late agreement of a UK-EU trade deal left businesses in the dark on the detail right until the last minute, so it’s unsurprising to see that so many businesses are now experiencing practical difficulties on the ground as the new arrangements go live.
For some firms these concerns are existential, and go well beyond mere ‘teething problems’. It should not be the case that great businesses simply have to give up on selling their goods and services into the EU. Ministers must do everything they can to fix the problems that are within the UK’s own control, and increase their outreach to EU counterparts to solve the knotty issues that are stifling trade in both directions.
This situation could get worse if the UK sticks to its guns and introduces additional SPS checks in April and full customs checks on imports in July. These timescales need to change - and the support available for businesses who are battling to adapt to new trading conditions significantly increased.
We need the government to acknowledge the problems companies are facing and act now.
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