The reality of Brexit

BLOG11th Mar 2021

Even with COVID19 overshadowing everything during 2020, Brexit did not exactly creep up on exporters on 1 January 2021.  However, with the EU-UK Trade and Cooperation Agreement only being finalised on Christmas Eve, UK businesses had very little time to prepare for the reality of Brexit.  It is little wonder, therefore, that we have had all of the headlines in the first few months of 2021 around delays at the ports, rotting food on lorries and empty shelves in stores.  Even the UK’s beloved “Percy Pig” was threatened by EU “red tape”!

But how much of what has happened could have been predicted?

With any change there will be teething problems and, to a degree, some of the issues experienced by exporters fall into this category.  Where businesses did not have the correct authorisation in place on day one, or where lack of familiarity of the documentary requirements led to errors, these can be categorised as teething problems.

However, where there is insufficient capacity, either due to the number of veterinary staff, customs agents or HMRC officers to physically undertake the necessary checks or prepare the paperwork and declarations required, this is a more systemic issue.  With initial estimates that the UK’s exit from the EU single market would create an additional 200 million extra export declarations, lack of capacity could have been predicted.

However, with the final shape of the deal between the UK and the EU being agreed in the last few days of the transition period even those that planned for the worst case would have had to make changes to their processes at the 11th hour.  A large part of the Agreement with the EU is given over to the origin rules that need to be met to allow the trade in goods between the UK and EU to be free of customs duties.  It was these complex rules that threatened Percy Pig.  Until these origin rules were agreed, UK businesses couldn’t make the necessary applications to obtain the Approved Exporter status to facilitate the easier movement of their goods to the EU.

Finally, some of the issues faced by UK businesses are the logical consequence of changing our relationship with the EU from one of partners in the same single market to third country status.  It is not about the EU confiscating truckers ham sandwiches; it is simply the application of the EU’s rules for trading with third countries that the UK helped to develop.

Are these problems here to stay?

Without significantly increasing the number of vets and customs staff, the lack of capacity will continue to cause delays.  However, already there are murmurs of a comprehensive veterinary agreement between the UK and the EU.  Such an agreement would greatly ease the pressures on food exporters, particularly the seafood sector that has been at the forefront of the post-Brexit challenges.

However, businesses cannot afford to wait on the UK Government to solve the Brexit issues.  Rather, there are steps that businesses can take to help remove some of the challenges.

There are grants available to UK businesses to help with the completion of customs declarations.  These grants can assist with the cost of recruitment of relevant staff, IT solutions to facilitate the submission of declarations and training to upskill existing staff giving them the knowledge to complete their own customs paperwork.

In addition, there are other measures that businesses can take that can significantly mitigate many of the challenges experienced.  This can be as simple as applying to HMRC for Approved Exporter status in order to speed up the process of evidencing entitlement to preferential duty rates.  Alternatively, UK businesses may need to consider more extensive changes to their supply chain and operating structures to help circumvent the problems at the port.

Whilst not all problems may be here to stay, the reality of Brexit is.  As with any significant change, if they have any concerns about the impact on their business, I would advise businesses to seek professional advice.

Alistair Duncan is taking part in the Life After Brexit webinar, hosted by the Scottish Business Insider on the 18th March, to further discuss how the effects of Britain’s long anticipated departure from the EU is only now being felt by businesses. Find out more and register for the event here. 

If you have any further questions, please contact Alistair Duncan, alternatively you can find out more about VAT & Duty here.