BLOG: TRADING WITH THE EU WHILE LEAVING THE EU: PART TWO15 April 2021
In part two of her blog, Andrea Collins explores the ways in which leaving Europe impacts UK trade with the rest of the world, the pros and cons of new markets and how companies can educate their European customers to become allies in keeping UK/EU trade moving.
The scope of our work with Growth Hub clients includes not just the impact in the EU but also how leaving the EU has impacted our exports to the rest of the world. Now we’re outside the EU, we’re no longer able to take advantage of those 70+ free trade agreements that we had as part of the EU.
And when we’re looking at the origin of our goods, some of the trade agreements that we’re negotiating with countries in our own right, may not have the kind of origin protocols that allow us to count EU origin raw materials and processing towards the UK origin of our finished goods. This may make it difficult for some UK manufacturers to be able to say they’re producing UK origin goods which can be imported into that ROW country under preference. Our products could face third country duty on import into that ROW country which has an impact on price and competitiveness. This is part of the ripple effect caused by leaving the EU and many people don’t understand the full ramifications of that.
Regulation is another complex area: I’m looking into certain regulatory standards in each sector because we are now operating two separate regulatory regimes – a UK one and an EU one – which means that, depending on where you want to place goods in the EU or EU/Northern Ireland or the GB market, you’ve got two separate regulatory bodies and sets of regulations to comply with.
Dealing with all this complexity may provide a glimmer of hope in that, as we have to upskill to continue to trade with Europe, it may make ROW countries seem less daunting to deal with, particularly those exciting, high growth, emerging markets, of which I am a huge advocate. However, some of those countries have high levels of corruption, different sets of regulation, and more effort has to be put in to mitigate the risk associated with exporting to those markets.
Our default export market outside of the EU bloc is the US, and I think it’s wrong to say, ‘forget the EU, look at the US’. The US is a notoriously difficult market to penetrate for a whole raft of reasons. It has a federal state system, with states having different laws and taxes, and the kind of compliance required to ship certain goods can represent a huge cost that some small businesses simply couldn’t afford.
There’s a reason why we’ve traded so heavily with Europe and it’s not just because we’ve been in the Single Market and Customs Union. It’s because we’re similar to each other, we’re culturally aligned, English is widely spoken. It’s a paradise for UK companies to export to (or used to be).
What we’ve been doing is working with clients to educate them as to all of the different easements, customs special procedures, and deferment mechanisms that EU trade customers have at their disposal but which they might not be aware of, so that our clients can educate them. For example, when you’re importing goods to the EU, you may not have to pay the VAT as the goods arrive. They have a postponed VAT accounting scheme in a lot of member states like we do. But those EU trade customers don’t know about it. So, our clients are able to say, ‘this is the process, why don’t you register for postponed VAT accounting? Or have you thought about obtaining authorisation to operate this customs procedure?’ We’re just trying to find ways of removing some of the additional cost and some of the friction associated with EU/UK trading. All we can do is educate our clients and have them educate their customers.
I believe very strongly that it’s worth persevering with Europe – it’s such a large market for us and culturally very close. It’s never going to be the same as it was because our relationship and trading terms have changed, but it will become in the next 18 months to two years, just a different way of trading with the EU. We may see slightly less trade with the EU and more outside of the EU, but the EU will remain a really big trading partner for us because of its proximity and because of the integrated nature of our supply chains.
I think our services sector will shrink more than our goods; we are working towards having a Memorandum of Understanding on framework for financial services, but this can never replicate the protections and freedoms that UK financial services companies enjoyed as part of the Single Market. We will undoubtedly see more bureaucracy and protectionism in the sector, which will have a real detrimental impact on the City of London even though it has always been such a strong brand in Europe.
Free webinars coming up:
- 10 May | 1-2-1 support sessions to help you manage issues with EU trade
- 11 May | Overcoming the new complexities of B2C sales into the EU
- 25 May | How can UK service companies adjust to the new way of trading with the EU?
For more EU support information from the Growth Hub, visit www.bizgateway.org.uk/trading-with-europe-support.