The government’s gift to British companies in the new year is another dose of pain thanks to Brexit. Businesses have barely had a chance to breathe during the many crises that hit the economy – from inflation, to pandemic chaos, to labor shortages. And now they will be put in yet another stranglehold with a new trade barrier.
Until this month, Brexit trade controls were only actually imposed on British exports to Europe. But now the last components in a hard limit used in the other direction. On 1 January, controls on European exports to the UK were installed, which meant more costs, more filling out forms, more bureaucracy, more man-hours wasted on the meaningless dated burden of bureaucratic mandates.
There are four key aspects to what is happening. The first is customs declarations. During 2021, UK importers importing goods from Europe could delay the submission of their customs declaration for six months. Now they have to submit them at the border, filling out a complex, cumbersome document with multiple data fields crammed with technical details.
Most goods only face low or non-existent tariffs due to the trade agreement signed by the UK and the EU. But even here, the dreaded shadow of bureaucracy lifts its head. To avoid paying customs duties, you must show that the product originates in Europe. This is called a country of origin control. If a company imports an Italian sausage from Rome, for example, they have to prove from a forensic point of view that all the ingredients came from Europe.
The most demanding of all requirements are sanitary and phytosanitary controls (SPS), which aim to protect against disease in plants and animal products. The true nightmare of these inspections, which often involve on-site physical inspections and extensive documentation signed by veterinarians, has been postponed until later in the year. But the original advance notice requirement was introduced last week.
The final piece of the puzzle involves the Goods Vehicle Movement Service (GVMS). This packs all the statements together and attaches them to a vehicle so the customs authorities know that everything is done. We are already seeing child issues with the system. Some companies have put the trailer’s registration number on the system instead of the vehicle’s. Several companies have reported error messages, even when they fill it in correctly. Truckers warn that there are queues in Calais due to the system – either due to errors in the form or because it is not working properly.
This is the picture across the trade network: reduced flexibility, increased costs, increased bureaucracy and pointless delay. It is a functional definition of how Brexit works. All the old trade barriers that used to suffocate the continent before the creation of the customs union and the internal market have been reintroduced for Britain. It’s like going back in time.
No one expects explosive delays this week. Trade is still very quiet after Christmas, and exporters will still try to avoid shipping products over the first days of the new system. But anecdotally, the hauliers, logistics companies and business representatives I have spoken to say there are early signs of problems, including the return of trucks in Calais.
The British government would like to make sure there are no massive ones queues of trucks popping up in the evening news. They know the policy of how it works. That image would make them look ridiculous. If it threatened to come true, most customs experts expect it to ease controls to ensure traffic flows, regardless of the lack of control it would entail. After all, this has largely been the approach so far – repeatedly delaying the introduction of controls for fear of what would happen if they launched them.
Their real tactic to prevent a PR nightmare is to locate the delays. Instead of taking place at the border, they take place at depots where trucks are detained until all documentation is properly completed. Freight forwarders and logistics companies, the people whose livelihoods depend on moving goods, have become Brexit’s unpaid police officers. .
But tucked away as it is, we have a good idea of what these new impositions will do to act because we have spent the last year watching it happen in the other direction. ONE study by the British Chambers of Commerce in October 2021 found that 45 percent of companies had a very or relatively difficult time trading goods with the EU. The Food and Beverage Association concluded that sales to Europe fell by 23.7 percent in the first three quarters of 2021 due to Brexit trade barriers. The British Trade Policy Observatory reported a hit to the British economy of £ 44 billion. The Government’s own Office for Budget Responsibility admitted there would be a structural cut of four percent of long-term potential productivity as a result of Brexit.
Then the British Chamber of Commerce conducted a survey recently of Brexit’s impact on UK companies, eight out of ten of them reported increased costs, half reported staff shortages and two thirds of exporters reported trade problems. A medium-sized producer in Ayrshire responded to the inquiry by saying: “I do not have time to talk about all the difficulties we have experienced. Brexit has lost our business, increased our costs dramatically and killed our sales expansion in the EU. […] My anger and frustration cannot be properly expressed. ”
Of course, companies were already hit by the chaos the pandemic inflicted on trade networks, especially in supply chains and demand volatility. But the government knew this when it decided not to extend the transition period. It decided to impose the Brexit chaos on top of the Covid chaos. Now inflation is rising, labor shortages are grinding us and consumers are getting hurt. But instead of helping, No.10 introduces measures that will make the situation worse. And many of the companies affected will eventually have to pass on the cost of all these changes to the consumer, exacerbating the cost of living crisis.
It is a long time since the sunny days of the Brexit vote, where Boris Johnson and his allies made all sorts of promises about how glorious it would be outside the EU. Today, we see the reality of it: a troubled punishment mechanism, imposed for reasons people can barely remember, and hit the UK economy at its most vulnerable.