On the 23rd June 2016, the UK voted to leave the EU triggering Article 50. More than 3 years on and the deadline looms at the end of December. Time is running out to prepare. Anxiety around what will happen, especially around the borders if a deal is not agreed. Steve Box, Chairman of Accelerated Payments discusses the Brexit challenges ahead for UK businesses if no deal is reached with the EU and puts the impact in numbers!
Brexit discussions seem to raise more questions and speculation than answers. Could an increase in red tape lead to food shortages? Could increases in border processes damage just in time business models?
BLT: 90% lettuce, 80% tomatoes and 40% beef
As per the schedule of tariffs published in May, roughly 85% of EU food imports will be hit with tariffs. BRC estimates that the average tariff would be higher than 20%, which could jump to over 40% for beef and cheese. The EU accounts for c.70% of UK food and non-alcoholic drinks imports and exports. During the winter months, 90% of our lettuce, 80% of tomatoes and 70% of soft fruit are imported, the vast majority coming from the EU. Brexit, and the associated uncertainty, will have a material impact on the sector. Exports are crucial to some of our food industries, there is currently no system in place to prioritise perishable goods at the border. This ultimately leads to the risk of wastage. If the additional paperwork leads to delays, some exporters are questioning whether they should send the goods. Those that cannot be successfully exported will return to the domestic market and impact gate prices. This will have a negative impact on farmers and ultimately impact the consumer. It is not only the price point that should be considered, but there is also some concern in the standards of some products coming in. EU organic standards have agreed to assist this in a years extension from when Brexit ends whilst alternatives are considered to smooth the path of products into the UK.
70 extra seconds could cause six-day queue at British ports
Around 4m lorries per year come through the current frictionless trade corridor. The government have yet to release an agreed vehicle movement system or visibility of the IT software to help with new procedures and processes. It is likely trucks will be stuck in traffic jams until companies get the hang of the new procedures. With the volumes mentioned, even if you add a one-minute delay to each truck, that is a massive addition to the time costs involved.
Another point to bear in mind is that 85% of hauliers are small businesses, often family run or individuals. This industry is difficult to commercialise with consistency of procedures and difficult to be easily understood. There is an insufficient number of people with expertise on the rule and regulations that will be able to help businesses.
An additional 495 documents per minute
One thing is for certain, that there will be a significant increase in paperwork to send goods to and from the UK to the EU. You are going to need:
- A safety and security declaration
- A completed customs form to determine if your goods are made in the UK or use sufficient UK and EU parts to satisfy conditions for zero tariff access. If they do not meet this qualification, there will be a tariff and duty imposed.
- To calculate and account for VAT with whichever country you are sending your goods to. Note that there may be different VAT regimes to handle.
- If goods consist of a product with plant or animal origin there is the additional export health certificate. For those dealing in animal produce a wet stamped certificate from a veterinary surgeon will be required stating goods comply with flight and sanitary rules.
HMRC estimates an extra 260m declarations a year, which equates to an additional 495 documents per minute. The likely cost implication of this will be to the tune of £15bn worth of extra paperwork and resulting process. The irony of this is that one of main arguments for a Brexit was the complaints and challenges of Brussels red tape and here we are staring down the telescope at much more. The impact of a free trade agreement, akin to Canada trusses up acres of red tape.
Shifting our focus
But it is not all doom and gloom: consumer trends that we have seen emerge as a result of COVID-19 and lockdown means consumers may still be willing to spend on food, but their priorities may simply have shifted. We are seeing an increased focus on shopping locally and supporting small business – great news for indie retailers. There has been a patriotic drive to buy British Lamb to absorb surplus and many consumers have also been cooking at home more and experimenting with new ingredients.