Business

Brexit has hit profits say UK businesses that trade with EU

Survey findings come as new more complex border measures come into effect

Queues at Dover. British businesses have experienced a stark increase in the complexity and cost of trading with the EU since the UK left the bloc, spending an average of nearly £100,000 (€116,945) navigating the post-Brexit customs border over the past three years, new data has revealed. Photograph: Dan Kitwood/Getty Images

Emma Agyemang and Peter Foster
Tue Jan 30 2024 - 12:24

British businesses have experienced a stark increase in the complexity and cost of trading with the EU since the UK left the bloc, spending an average of nearly £100,000 (€116,945) navigating the post-Brexit customs border over the past three years, new data has revealed.

A survey of 1,001 senior decision makers working in UK-based businesses that trade overseas found that 81 per cent believed they faced more complexity today than they did before Brexit.

Three-quarters reported that their sales into the EU had fallen or become more complicated as a result of bureaucratic barriers, including tariffs and regulatory compliance obligations, that were erected by the EU-UK Trade and Cooperation Agreement.

A similar proportion said their business was “less profitable as a result of Brexit”, a view shared by 70 per cent of those who voted to leave the bloc and 79 per cent of those who wanted to remain. For those reporting that Brexit had “harmed” their operations, the mean cumulative cost since 2020 was £96,281.

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The findings come as the UK government on Wednesday begins to phase in new Brexit border checks on imports of most plant and animal products from the EU.

The British Chambers of Commerce warned on Monday that many firms remained “in the dark” about crucial aspects of the new border, which will require the use of export health certificates (EHCs) and include physical inspections at ports from the end of April.

William Bain, the director of trade policy at the BCC, said the border risked adding to business cost pressures: “There is a real fear that these extra costs will end up being passed on to the UK importer and their customers, putting upward pressure on inflation,” he said.

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Meanwhile, over three-quarters of the survey respondents agreed with the statement: “The UK has not experienced the trade boom that the promoters of Brexit promised” – including 73 per cent of leavers and 84 per cent of Remainers.

UK officials acknowledge that Brexit has created challenges for business, but add that they are working with industry and the EU to reduce the frictions as far as possible.

Alex Baulf, vice-president of global indirect tax at Avalara, a tax technology firm that commissioned the survey conducted by Censuswide, said he was a “little surprised” at the high total average cost companies had suffered.

But, he added that the overall picture of business being hurt by the new cross-Border compliance and trade red tape was not surprising.

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“There is a customs border now, businesses are finding ways to navigate that, but it implies a compliance burden with more red tape,” Baulf said.

“UK businesses have had less trade with the EU and that’s impacting [their] revenue. Where there is trade, there’s additional cost, which is eating into margins.”

The findings chime with recent surveys by the British Chambers of Commerce and Make UK, the manufacturers organisation, which indicated that businesses were seeing very little improvement in trade with the EU three years after Brexit.

Make UK found that nine out of 10 British exporting manufacturers were still facing challenges trading with the EU almost three years after the post-Brexit trade deal came into force, a proportion that had changed little since it conducted its first post-Brexit survey in mid-2021.

The Avalara survey found 82 per cent of British businesses would support efforts by the UK government to improve trade across Europe.

The research surveyed a range of businesses with up to £500mn turnover. Roughly half had fewer than 250 employees while the remainder had more than 250.

The majority (68 per cent) said they had explored trading in non- EU markets, with 45 per cent actively expanding into the US, 41 per cent in Canada, 27 per cent in New Zealand and 26 per cent in China. – Copyright The Financial Times Limited 2024

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