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British businesses that export to the EU are facing mounting costs three years after Brexit as a result of emerging regulatory challenges including new carbon taxes, VAT changes and additional border controls, the British Chambers of Commerce has warned.
In an assessment of trading conditions with the bloc three years after the EU-UK Trade and Cooperation Agreement came into force, the trade body warned that businesses were becoming mired in so much red tape from new EU rules that it was easier for many to trade with more distant countries than with Europe.
BCC director-general Shevaun Haviland warned that looming rule changes would have “big repercussions” for business that the government must not ignore if it wanted to deliver growth.
“We need to take a smart but flexible approach to how we handle these alterations to keep their impact to a minimum,” she said.
“If we want to get businesses growing then we need to boost our exports, and the EU is our number one market. That’s a reality that should not be ignored by our political parties.”
The worst-hit sectors are agrifood, chemicals and advanced manufacturing, which, having already adapted to post-Brexit customs changes, are now facing reporting requirements on their supply chains, carbon emissions and plastic packaging usage.
The EU decision to start phasing in a carbon border tax regime from October 2023 was already hitting businesses, which were required to provide data on carbon usage to EU importers, with taxes being imposed from January 2026, the report said.
UK companies were having to adopt “processes for weekly, and in some cases daily, monitoring of gas usage”, to provide the information related to the reporting requirements, it added.
The BCC, which represents 50,000 mostly smaller British businesses, urged the government to seek simplifications to the reporting process and then to legally merge the EU and UK carbon pricing schemes in order to avoid such border bureaucracy.
It cited a July 2023 membership survey that found that almost two-thirds of UK exporters said trading with the EU was more difficult than a year ago — compared with only one-fifth of exporters to the rest of the world.
In the agrifood sector, the UK continues to have worse access to the EU than countries such as New Zealand, with the BCC backing a plan by the opposition Labour party for Brussels and the UK to agree a veterinary agreement to remove barriers to trade.
The report said UK agrifood businesses had “paid the price through delays, wastage of food and higher costs as a result” with some companies entirely abandoning trade with EU customers.
Mark Fane, the chief executive of Crocus, an online garden retailer that employs 250 people with a turnover of £30mn said that business had recently been forced to give up a £10,000 export order to Ireland after falling foul of EU rules on soil types.
“It’s death by a thousand cuts. We tried every which way to export the order but hit barrier after barrier. If you’re a big company, you grind your way through it, but it just gets to the stage where you can’t be bothered any more,” he said.
Fane added that the business was now focused on the UK market and propagating plants locally, but was still supplying non-EU clients. “It has to be a bit ridiculous that we can supply the Middle East but not southern Ireland,” he said.
The BCC listed a range of other measures to improve trade, including seeking simplified VAT arrangements for small businesses, closer regulatory alignment in sectors such as chemicals and improved mobility arrangements for service professionals.
Mike Martin, the group director at T L Dallas, an independent insurance broker in Bradford with 160 employees, said the firm had been affected by rules that required insurers to establish inside the EU in order to serve clients there.
“It is very limiting for us. Before, if we had a client open an office in Germany, we could passport into Germany and look after them, but now it is illegal for us to advise, so that favours the big firms that have EU subsidiaries,” he said.
Martin added that many of his clients were also battling Brexit. “The businesses we service are typically small independents, so they’ve withdrawn from exporting and we’re finding that for some it has completely put them off trading overseas,” he said.
The Department for Business and Trade said: “In the year to June, we exported over £360bn worth of goods and services to the EU, an increase of 17.1 per cent in current prices on the previous 12 months.”
It added that the UK economy had grown faster than Germany and France since leaving the EU, but acknowledged that there were “some issues”.
It also said it was “working closely with the EU on solutions, including changes to the Border Operating Model and the introduction of a Single Trade Window, that will make it easier for UK businesses to trade”.
Source: Economy - ft.com
