Despite the triumphant fanfare with which the Prime Minster announced the Free Trade Agreement with the European Union less than two months ago, much of the detail glossed over at that time is beginning to emerge, with businesses bearing the brunt of the burden of increased regulation and costs.
Two issues in particular are being highlighted in the national press and are being reported to us by UKWA members, first the impact of import VAT (strategically not mentioned as the government trumpeted post-Brexit ‘duty free trade’) and the new rules of origin, which has barely been acknowledged.
Both are starting to affect UK based SMEs trading with the EU, especially those who embraced the opportunities presented by ecommerce and sell products online.
One UKWA member, for example, has orders from consumers in Denmark, Sweden and Germany, but is struggling to fulfil those orders because, unlike business traders, consumers do not have EORI registrations. While the larger companies are mostly able to overcome the hurdles, through subsidiaries and/or distributor models, SMEs are finding that carriers are not providing home deliveries in EU countries because they are unable to complete customs declarations for unregistered consumers.
As yet these carriers are unwilling or unable to act as financial representatives of UK sellers in destination European markets. Over time, as the dust settles, no doubt carriers and logistics providers in the EU will offer services to UK businesses for financial representation, but in the meantime, the new rules are denying SMEs access to a market of 250 million consumers across Europe.
In addition, in the case of the same UKWA member, because products were originally imported into UK from USA and China, they are now subject to a second ‘hit’ of import duty, due to the rules of origin confirmed in the Free Trade Agreement.
As The Observer reported recently, a growing number of UK companies see moving to Europe as the potential solution, revealing that hundreds of mostly UK-owned or UK-based businesses are already making enquiries about setting up branches, depots or warehouses in the Netherlands alone. If this should happen, it will mean the loss of jobs, economic activity and tax revenue for this country.
In contrast, UKWA and our members are receiving enquiries from EU traders facing similar issues, seeking speedy access into UK markets, and to avoid the risks of delays currently experienced at EU and UK borders.
This all chimes with UKWA’s long-held view that overall Brexit is good news for our sector, and more warehousing will be required. On balance of critical mass, however, with 65 million consumers on our island versus 250 million consumers on the continent, Europe may take the lion’s share of the predicted growth, stimulating the risk of warehousing – and therefore jobs – drifting to the continent.
UKWA is here to help, and already providing advice and guidance to those wishing to operate their warehouses as customs bonds, as many of our members do – just one solution to alleviate the punitive rules of origin issues. We are also forging links between UK and EU service providers and, as ever, we continue to raise these critical issues with government.