Dale Williams, Partner in the Corporate team at BPE Solicitors, looks at the result of Brexit six months on and how UK businesses are being affected.
When British Prime Minister Boris Johnson announced his Brexit trade deal on December 24 2020, he said it would enable UK companies “to do even more business” with the European Union.
Whilst we have to accept Mr Johnson’s habit of, perhaps, being overly optimistic in his approach, leaving a trading bloc with a deal that introduced tariffs and hard borders was in truth never likely to lead to his stated outcome.
Instead the Government needed to use other leverage and polices to increase trade within the UK and encourage trade elsewhere in the world whilst making trade with the EU as smooth as possible. It was known that trade elsewhere could never replace trade volumes with the EU. The Office for Budget Responsibility has said it expects little effect from new trade deals, so a need to make trade as smooth and open as possible with the EU and to build on that 24 December agreement was always necessary to avoid long-term economic decline.
Whether you were for or against Brexit that is the reality of the situation. To date, no real progress has occurred, but we must be fair and allow for the existence of a worldwide pandemic having impeded the doubtless good intentions of both sides to improve the situation moving forward. After all it is in the long-term interests of both the UK and the EU. The clock is ticking and the snapshot of where we are at this moment is not encouraging.
Many companies say that their ability to trade with the bloc is at risk. Businesses that could previously get goods into the EU within hours of an order being placed are now facing lengthy delays and higher transportation costs due to new customs and food safety checks. The difficulties are not just ‘teething problems’, they are structural issues that, if unaddressed, may lead to potentially irreversible weakness in the UK export sector.
While larger companies can absorb extra costs, small businesses have been hard hit. A survey of 132 exporters by the Federation of Small Businesses in March found that 23% had temporarily stopped sales to the EU and 5% had stopped permanently. There has been little improvement since. Additionally, the situation is urgent for food producers, who have seen exports all but wiped out by the new trading arrangements.
Exacerbating the situation is a lack of clarity around payment of sales taxes and confusion about rules of origin requirements (which dictate the imposition, or not, for a tariff on particular goods).
So, for goods it is at present not looking good, but the vast majority of our economy is services and in that area, things would appear to be equally shaky. Mutual recognition of professional qualifications, such as for doctors, accountants and architects, have yet to be agreed on a sector by sector basis and the December deal made no provision for financial services, an industry that accounts for almost 11% of government tax revenue and 1.1 million jobs.
I will not mention the issue with Northern Ireland which has its own unique problems but the bad faith it has caused undoubtably does not help the larger picture.
It is notable that the UK government has not published an assessment of the economic fallout from Brexit, despite numerous requests, and continues to tout its purported benefits. Most benefits however of a “Global Britain” so far remain at best theoretical.
Therefore, at the six month report card moment, taking account of course of the disruption caused by COVID-19, the comment has to be that as we begin to open up from the virus we must begin to open up with our trade in the EU. The government must seek to build on the December deal and reduce the deluge of paperwork and delays which presently hampers progress.
Will Brexit ultimately be a good thing? It is too early to tell but, if real effort to improve the situation is not made, the likelihood of it being so becomes ever slimmer.
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