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Export woes?

A year ago, the news was full of stories on how the UK economy was about to implode following Brexit while Covid was an Extinction Levelling Event.

At the start of the New Year Covid hasn’t yet been beaten into submission, but the world of healthcare has made great strides in neutralising the worst of it. As for the economy, especially for those involved in export to the EU, the reality has been just as difficult.

Back in January 2021, a week after the Transitional Period had ended, European news agency Politico warned businesses to “wake up to hard truths on tariffs” and that the “‘tariff-free’ deal does not mean British businesses won’t face new duties.” As the story highlighted, for tariff free entry into the EU, goods had to be predominantly made in the UK.

Politico’s concerns were echoed by the Guardian a month later. It commented that “half of British exporters to the EU are facing difficulties with mounting Brexit red tape and border disruption.” Citing data from the British Chambers of Commerce (BCC), the story reported that 49% of UK exporters in a survey of 470 firms had suffered problems with post-Brexit arrangements since the start of the year.

As a result, the Federation of Small Businesses (FSB) reckoned that by late March 2021, 25 percent of 1400 small exporters surveyed had halted sales to the EU; many had suffered either shipment delays or loss of goods.

Delays are an irritant to many producers (and customers to be fair), but they’re deadly to businesses where goods are perishable. As ITV News highlighted in June, quoting data from the Food and Drink Federation, sales to non-EU countries made up 55% of all UK food and drink exports in the first three months of 2021, compared to less than 40% a year earlier. But this rising proportion doesn’t mean a boom in exports to non-EU countries – those exports only rose by 0.3%. What the data really illustrates is that sales to the EU fell – by £1.4bn. Overall, exports of food and drink stood at £3.7bn compared to £5.1bn a year earlier.

Even the Office for National Statistics saw a 23.1% decline in first quarter 2021 trade with the EU in data published in late May 2021.

Fast forward to October and the BCC noted some improvement for exporters but saw little to celebrate. Another of its surveys, this time of 2600 UK exporters, found “that the recovery in export sales had largely stalled in Q3 and that the proportion of firms reporting increased sales rose [marginally] to 30% from 27% in Q2.”

As to the causes, survey respondents detailed worries over the supply chain crisis and Brexit related problems as the main causes of difficulties with export sales. Some had even ceased exporting to the EU altogether because of red tape and delays at borders. But other factors impacting export sales included the surging cost of shipping as well as the shortage of haulage drivers.

For some, the only solution is to setup a distribution network or hub within the EU. But this move is remarkable as before Brexit many firms found shipping to Europe easier and less expensive than shipping to remote parts of the UK.

Take Antos, a Scottish dog chew producer. It, according to DW.com, had spent seven years or so cultivating business in Europe. However, Brexit forced the company to move the entire export side of its business to Europe. It acquired a large warehouse in France and now has barrier free access to Europe.

Are there any other solutions? For the FSB there are two options: Increase the threshold to £1000 at which tariffs and taxes for imports and exports apply; and sign new free trade agreements with fast-growing economies around the world, including the US, that include dedicated small business sections chapters. Beyond that firms need to hope for a fair wind.

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