Small and medium-sized enterprises in the UK, including many exporters, are completely unprepared for an impending “avalanche” of new EU regulations and taxes, according to a new business survey.
The survey by the British Chambers of Commerce of 733 SMEs showed more than 80 per cent were unaware of reporting requirements under an EU green tax that takes effect next month, or obligations relating to the bloc’s value added tax regime that kick in from January 2025.
The BCC is urging the government to improve communications with British businesses as they grapple with what industry is dubbing “Brexit 2.0” — divergence between EU and UK regulations and taxes that creates additional red tape at the border.
William Bain, head of trade policy at the BCC, said UK SMEs were facing an “avalanche” of EU regulations and taxes.
He added it was a “serious worry” that 80 per cent of UK manufacturers that were also exporters told the BCC survey they had no knowledge of the EU green tax, called the carbon border adjustment mechanism.
From October, EU companies must compile reports on the carbon emissions attached to some imported goods, including steel, aluminium and fertilisers, with businesses having to buy certificates to cover pollution embedded in products from 2026.
The paperwork and costs associated with the carbon tax will land on UK companies that supply products to EU businesses covered by the green tax.
“It is just the start of a series of changes that will gradually ratchet up over the next three years, to deter the use of cheaper but higher carbon steel, and other goods with highly embedded climate damaging emissions, being imported into the EU,” said Bain.
George Riddell, director of trade strategy at accounting firm EY, said the reporting obligations under the EU green tax would introduce “a significant compliance burden” on UK businesses, with many reporting on carbon emissions that are embedded in their products for the first time.
“With less than a month to go, businesses need to review their EU import footprint and assess both the compliance and organisational impact on their trade,” he added.
Meanwhile, the BCC survey found 87 per cent of UK exporters were unaware that changes to EU VAT rules will require businesses providing services — even electronically — to pay the tax where the customer resides.
“If you’re a UK-based cook who provides cooking classes to EU customers — either in person, or online from the UK — then from January 2025 you’ll need to pay VAT in the EU customers’ state,” said Bain.
The BCC survey, conducted in July and August, also identified that 43 per cent of British manufacturers were unaware of how the UK had developed an alternative product quality mark to that used in the EU.
Trade experts said that without intervention, the process of the EU and UK diverging on regulations and taxes after Brexit will create additional bureaucratic friction for UK exporters.
“Unless there is significant UK-EU reintegration, then businesses will have to adjust to the fact that trade across the Channel is going to get increasingly difficult.” said Sam Lowe, partner at consultancy Flint Global.
The Department for Business and Trade said it was tailoring regulation to ensure UK businesses could take advantage of new opportunities and freedoms after Brexit.
It added the UK’s trade deal with the EU meant “we can now regulate in a way that suits our economy and businesses, allowing us to be more innovative and effective without being bound by EU rules”.
“We regularly engage with UK businesses to provide them support ahead of any regulatory changes,” said a spokesperson.
Source: Economy - ft.com
