January 30, 2023

It is now two years since the UK signed its post-Brexit trade deal with the EU, but for small companies like Doncaster-based Apothecary-87, the tribulations of trading across the English Channel show no sign of abating.

Owner Sam Martin’s range of premium beard oils and hair balms boomed when his company was founded in 2012, but export growth came to a shocking halt when the EU-UK Trade and Cooperation Agreement came into effect on December 31, 2020 .

“Before Brexit, our business was 75 per cent export and the rest in the UK, but Brexit has pretty much turned that number upside down due to the cost and difficulty of getting products to those countries,” he said.

In a report marking the TCA’s two-year anniversary, Britain’s Chambers of Commerce said Martin’s frustrations were typical of small and medium-sized businesses now dealing with “structural” rather than temporary difficulties with the deal.

A BCC membership survey included in the report found that more than three-quarters (77 percent) of companies affected by the deal said it didn’t help them increase sales; while more than half (56 percent) of respondents said they were struggling to adapt to the new rules for trading goods.

Shevaun Haviland, the director-general of the BCC, called for an “honest dialogue” with the government on how to improve the deal, and presented ministers with a 24-point plan to ease the burden on businesses.

Mark Newton: ‘The TCA is definitely a growth inhibitor’ © Simon Buck/FT

“There are very few easy solutions to the many problems companies face when trading with Europe, but it is disappointing that almost two years after the TCA was first agreed, nothing has been done to address some of these problems,” she said.

The BCC’s main demands are a Swiss-style agreement with Brussels to abolish controls on plant and animal products; a Norwegian-style agreement to reduce the complexity around VAT on low value imports and ongoing unilateral recognition of EU industrial and electronic product standards.

Longer term, the BCC says Britain should consider an EU-UK deal on VAT and an agreement to deepen EU cooperation on product regulation and facilitation of professional services when the TCA comes for its five-year review in 2026.

Announcing the eleventh-hour deal with Brussels on Christmas Eve 2020, then-Prime Minister Boris Johnson said that “no non-tariff barriers to trade” would arise from TCA.

However, Martin said Apothecary-87 faced a host of lingering post-Brexit challenges, including higher import costs caused by a weaker pound, longer lead times for sourcing ingredients, the need for import licenses for cosmetics, EU border controls and payment of import VAT – all this put off EU customers.

He added that online retail customers in the EU who had previously bought a single £10 product were faced with VAT and a handling fee that more than doubled or tripled the price, while hairdressers in Italy and Spain were forced to apply for import licenses for cosmetics. for a maximum of € 1,000 each.

“Only a true ‘superfan’ of our products can accept this kind of higher price,” said Martin, who urged the government to do more to facilitate exports to the EU.

The BCC has also asked the UK to agree with Brussels to remove the need for a so-called “fiscal intermediary” – an EU registered company that can declare and pay VAT – for small businesses to sell products worth less than € 150 to be sent to the EU .

Video: The Brexit effect: how the UK left the EU

Analysis by Aston Business School suggests that exports to the EU are 26 per cent lower than they would have been without the non-tariff barriers imposed by the TCA. There has been a sharp drop in the types of goods being traded, which have fallen from 70,000 to 42,000 since the new rules came into effect.

William Bain, the BCC’s chief of trade policy, said it was remarkable that responses to the annual member survey grew increasingly bitter as companies realized that the barriers posed by the TCA were not temporary, but permanent and structural.

“There is a state of heightened emotion about how heavy these charges and paperwork are, alongside a palpable sense of anger that nothing is being done to alleviate them,” he added.

For some companies, such as Suffolk-based LMK Thermosafe, which manufactures industrial drum and container heaters, the answer has been to move distribution networks to Europe to maintain reliable supplies to customers.

Mark Newton, the company’s chief executive, said he had struggled to retain customers from the EU, which accounted for 30 to 40 percent of the company’s exports. He added that it is now easier to export to the US than to the EU.

Despite hiring an additional full-time staff member to help with the paperwork, Newton said delays still occurred even when the paperwork was correct. “I had hoped to avoid the opening in the EU. I thought we could get the processes in order, but I have now had to accept that it is necessary. But it all adds cost and subtracts from margin,” he said.

He added: “The TCA is definitely a growth inhibitor. Blue chip customers have stayed with us, but with our EU competitors they’ve definitely been rattling around with our distributors saying ‘you don’t want to do business with the British, it’s too complicated’.

Overall, the BCC said its findings on the TCA two years later “should give decision makers food for thought” as dissatisfaction with the agreement has grown over the past two years.

It concluded: “The sudden imposition of non-tariff barriers in one sector after another has led many companies to conclude that free trade is currently not allowed.”

The government said the TCA has ensured market access for UK companies in key service sectors and opened up new opportunities around the world.

“The UK has provided exporters with practical support in implementing the TCA, including launching an ambitious export strategy and a new export support service,” said a spokesman.

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