On 31 December 2020, Britain formally came to the end of a one-year withdrawal period that was designed to help businesses prepare for life outside the EU. In the months that have followed, lots of small and large businesses have reported problems both importing and exporting goods to the EU.
While by no means the only factor affecting trade, what is the post-Brexit reality for small businesses looking to trade with the EU? Is it resolvable? How long will the issues last and what can you do to adapt?
What’s behind trading problems?
Global trade is being affected quite seriously by the COVID-19 pandemic. With lots of production factories around the world facing lockdowns, operating with fewer staff, and with lots of countries in the Global North facing a shortage of workers in key industries, there is already a lot of disruption to trade. But it’s also the case that trading problems between parts of the UK and the EU are facing additional disruption, and this is due to the post-Brexit reality of trade.
When Britain came to the end of the withdrawal period last year, the so-called ‘grace period’ that allowed lots of business to continue importing and exporting as normal came to a close, meaning that businesses have suddenly found themselves facing steep administrative costs when it comes to trade.
The key issue here is supply chains. As a member of the EU, supply chains – networks of producers, buyers and manufacturers – between the UK and EU were integrated. Trade could flow freely with no additional paperwork. But since the UK’s departure, these supply chains have ended, meaning British businesses have to fill in a lot more paperwork in order to move goods between the two trading blocs.
Learn more: how to create a supply chain
How have large businesses adapted?
As part of the withdrawal agreement, Northern Ireland is continuing to follow some EU Customs Union regulations. This means that while Northern Ireland has left the EU with the rest of the UK, fewer customs checks are taking place there. As a result, some larger businesses have been moving their operations to Northern Ireland or setting up EU-based arms in order to get around some of these costs.
Some businesses are also able to claim financial support when it comes to exporting. UK Export Finance is the UK government’s export credit agency and supports many businesses in helping them export. Due to some of the difficulties businesses have been facing when it comes to trade, this agency is currently lending its highest amount of credit in 30 years.
How have small businesses adapted?
Smaller businesses lack the same resources, staffing power and financial stability to relocate or claim financial assistance, making it much harder for them to respond to these challenges. A recent survey by the British Chambers of Commerce found that half of small businesses are finding it harder to export to the EU.
Due to the new complexities of trading, the UK government set up a small and medium enterprise (SME) fund offering grants to help overcome trading challenges. However, this fund has been criticised for being overly complex.
Unfortunately, there is no easy way for small businesses to quickly overcome these supply chain issues. As the post-Brexit environment is still volatile and likely to change, there is only so much small businesses can do until some of the political risk dissipates. Despite this, SMEs can take some immediate steps towards minimising trade disruption.
How long will disruption continue for?
It’s difficult to say. Negotiations between the UK government and the EU on how to minimise disruption are ongoing and likely to continue. But with food, petrol and driver shortages all being exacerbated by the current agreement, it’s unlikely that the current situation will continue forever. Unfortunately, the majority of these issues relate to some of the finer political print of the Brexit and future relationship negotiations, so are out of the hands of businesses themselves. The most important steps that businesses can take in the meantime are speaking to trade bodies, lobby groups and consulting financial experts to adapt to the current situation.
How can your business adapt?
If trade disruption has been affecting you, it could be time to take action. The government has put together accessible guides on what businesses need to do to respond to trade disruption and these are a good source of official information. When it comes to addressing the issues that are affecting your small business the most, it can be a good idea to prioritise. Are some of your employees EU citizens and do they have the right to remain in the UK? Do you know how to process customs declarations and rules of origin regulations? Is your paperwork ready before reaching the border and do you know what goods will and won’t be checked? Are you prepared for changes to data management and storage?
Here are some key issues to address:
EU citizenship: If your business employs EU citizens, they may need to apply to remain in the UK. If they haven’t already, ask your employees to apply and be ready to support them if needs be.
Customs declarations: Customs declarations are legal documents declaring the contents and value of good you are important or exporting. Depending on the goods and the quantity of them, you may need to pay customs duty, although some exceptions apply to Northern Ireland. Ask an expert about your EORI number, commodity codes, relevant licenses and certificates.
Rules of Origin: Rules of Origin regulations prove that whatever it is you’re sending to the EU conforms to the health, safety and environmental rules of the European Single Market. You may need to prove to HMRC that you have the right certificates to export to the EU.
There are lots of complex rules that businesses need to come to terms with, and while that can be frustrating in and of itself, there are lots of hidden costs. Applying, signing and processing these new rules can take a very long time and there are lots of hidden charges, so getting the right financial advice and planning ahead is absolutely vital.
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