Jean-Marc Barki, chief executive of French manufacturer Sealock, anticipated Brexit would disrupt his business. But the scale of the problem only hit home when one of his trucks got stuck in the UK for seven weeks.
“We went from a system of pure fluidity to a really complex one,” said Barki, whose company relies heavily on the import of a UK made synthetic component to produce its industrial adhesive. He subsequently discovered that the paperwork required to import it to the EU’s single market from Britain was missing some crucial details.
“Those kinds of delays are unthinkable for a midsize company like us,” he said. If the problems do not ease soon, he added, he will have to consider changing his product’s formula to include ingredients from Germany or Italy rather than the UK.
More than three months after the introduction of the UK’s new trading relationship with the EU, the damaging consequences of non-tariff barriers have become all too clear for many British companies reliant on exports to the bloc’s single market.
Perhaps less well documented has been the impact on businesses and consumers in the EU and in particular France, one of the UK’s closest trading partners.
According to the latest French customs data for February, released last Thursday, the picture has improved slightly from the sharp drop in trade between the two countries seen in January.
In the first month after the new UK-EU trade deal came into force on January 1, imports from the UK to France fell to 78 per cent of their monthly average for the second half of 2020. Analysts said the fall was caused by disruptions at the border with Britain and the impact of Covid-19 on global trade.
While February did show a recovery, with imports from the UK to France down just 2 per cent on the monthly average for the second half of 2020, exports to the UK were still down 16 per cent compared with the same monthly average last year.
“In the long term we are expecting an incredibly important impact [on trade],” said Vincent Vicard, economist at the Centre for forecasting and international information (CEPII), a research centre.
France earns its largest trade surplus from the UK, importing much less than it exports. But some French sectors, such as wine, jewellery and aircraft, rely heavily on selling their products to the UK and were hit by the steepest falls in January.
Haulage costs and red tape on the rise
Although the effect of the pandemic may have played its part in the decline, analysts also blamed Brexit related factors such as higher transit costs, more red tape, new fiscal rules, duties on certain goods and costs related to any delays from customs checks.
Gavin Quinney, a Bordeaux wine merchant who exports most of his wine to the UK, said: “A lot of people are reporting issues with customs declarations and new paperwork.”
But he added that exporters are also often paying higher haulage fees, as they are forced to bring in relatively empty trucks from the UK and send them back full.
“There are literally no goods coming in from the UK at the moment so we agree to pay for the truck to come in empty,” Quinney said.
Costs for one truck’s transit are estimated to have risen between €80 and €300, according to an estimate by CPME, a union representing small and midsize companies.
Other companies have been forced to find other transit solutions. CLAAS, a German manufacturer of agricultural tractors that produces its farm vehicles in the northern French city of Le Mans, is now sending its products through Ireland rather than Calais and Dover.
“We prepared for the worst-case scenario. Still there are some hiccups,” said Trevor Tyrrell, senior vice-president for CLAAS’s western Europe sales and service division.
And while large companies such as CLAAS have the resources to implement new logistics and adapt their cost models to include delays, many small companies reliant on trade with the UK do not, analysts said.
‘The worst is yet to come’
“For small companies, not used to dealing with international trade, the additional costs and logistics can seem too much,” said Medef, France’s largest employer federation. “Some are already considering abandoning the UK market.”
The implementation of new standards for goods, and vague or unequal implementation of the Brexit agreement in EU countries, could lead to more hurdles for French companies: “The worst is yet to come,” added Medef.
Although the UK has pushed back full customs checks on some food and agricultural products entering from the EU from April to October (and in some cases January), French exporters are already bracing for further problems once they come into force.
For example, food and pharmaceutical products will have to comply with the UK’s own system of certification, independent of EU labels.
Carrying out independent laboratory tests on each shipment could prove an unbearable cost for small producers, said wine merchant Quinney. “These certificates would be a disaster for us,” he said.
Pharmaceutical and chemical manufacturers are also in the line of fire, according to Vicard, as UK-specific certificates on medicine and chemicals are likely to be costly.
“When it comes to new products, companies might very well change their international production strategy to avoid the extra cost,” said Vicard.
Source: Economy - ft.com
