Business

Six months in the UK companies are still struggling with Brexit

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Nearly a third of British companies trading with the EU have suffered a drop or a loss in business since post-Brexit rules came into force on 1 January, according to a survey conducted by the Financial Times.

The survey, conducted by the Institute of Directors, also found that 17 per cent of British companies that previously traded with the EU had ceased – temporarily or permanently – since the beginning of the year.

The results find a blurred picture of trade arrangements with Europe, particularly for smaller companies that do not have the resources to navigate the barriers to trade launched by the UK’s departure from the single market. the EU customs union.

Six months after Brexit, companies reported that they continued to struggle with it new bureaucracy introduced by the UK-EU trade and cooperation agreement. Although the Brexit deal, he agreed Christmas Eve, confirming zero tariffs, zero-quota trade between Britain and the EU, the new agreements require companies to respect costly controls, customs controls and bureaucracy that have added attrition to trade.

Relations between the UK and the EU have also been sour on a new trade border between Britain and Northern Ireland which imposes controls on many goods crossing the Irish Sea, sparking violence in the UK. pro-British unionist communities in the region.

“Six months later, many companies are still struggling with the challenges of our new relationship with the EU,” said Jonathan Geldart, director general of the Institute of Directors.

“In particular small and medium-sized enterprises are struggling to navigate new procedures around export and import with the blockchain, while business leaders report more widespread difficulties in recruiting after the end of freedom of movement.” .

The IoD survey asked 651 companies to give their assessment of the impact of Brexit so far.

Of companies trading with the EU, 31 per cent said new barriers as of January 1 had a negative impact on trade with the bloc. Only 6 percent said trade had increased, while 58 percent said there had been no change.

According to a separate survey, conducted for the FT by the Chartered Management Institute, just over a quarter of private sector managers said changes to trade at the end of the Brexit transition period had negatively affected turnover. their organizations in January. Six months later almost the same proportion – 26 per cent – still said there was a negative impact, and largely the same organizations.

“Private sector managers have reported that post-Brexit trade challenges still have a negative impact on the rotation of their organizations,” said Ann Francke, executive director of the CMI, which sought the views of 1,354 executives. in his investigation.

Chart the bar of private sector managers in organizations trading with the EU - impact of Brexit changes on turnover (%) showing Many companies are still reporting success in turnover six months after Brexit

However, more than half of the leaders who took part in the CMI survey said that the initial challenges around trade with the EU created at the end of the Brexi the transition period had been resolved at least to a small extent – suggesting that many companies had begun to overcome the initial hurdles.

Some companies responding to the IoD survey have sought to focus on positive aspects of the UK leaving the EU: 17 per cent of companies said Brexit made them more likely to invest in their companies, compared to 15 percent who said it made them less likely to invest.

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An anonymous contributor to the survey said: “I am generally more optimistic about the economy because of Brexit, so I am more likely to invest in the future.”

But some British companies have responded to Brexit by launching profound changes in their companies, such as movement operations across the English Channel.

Many companies think the impact of the UK leaving the EU will worsen when some of the mitigations put in place to facilitate the Brexit transition come to an end this year, including the introduction of import controls at its borders. British with the block.

According to the IoD survey, about two thirds of companies said the new UK customs controls would have a negative effect on trade when they were put in place in January next year – six months after ‘they were to be introduced.

Chart the bar of To what extent do you anticipate the new UK customs controls to have a negative impact on trade?  (% of responses) showing Companies expect problems from new customs controls on EU imports into the UK

For many companies the annoyance of the new bureaucracy already introduced has been enough to convince them to give up EU businesses.

Last week, the Cheshire Cheese Company decided to stop selling to the EU wholesale. The cost of shipping a shipment to the EU has increased from around £ 300 to more than £ 1300, saying the end for its successful European trade.

Simon Spurrell, who heads the Macclesfield cheese specialist, said direct shipping to just 446 million EU consumers was no longer feasible, “nor can we now ship to Northern Ireland”.

Specialist cheese

© Jon Super / FT

“The government has successfully expelled us from the EU as a company, it is no longer commercially feasible.”
Simon Spurrell, Cheshire Cheese Company

He added: “The government has successfully driven us out of the EU as an activity, it is no longer commercially feasible and our distributors in France, Spain and Germany are not interested in doing business with us because of the additional cost. and difficulties with documents. “

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Meanwhile, the Totnes-based Motor Broker – which had bought all its bicycles from the EU – has stopped serving the region entirely. About 15 percent of the company’s sales were in the European Union, according to Paul Jayson, who heads the vintage motorcycle trader.

While Jayson now brings bikes from non-EU countries, such as Australia and the United States, this can take months instead of days. “We have always been global and we will survive but we are in a ‘no agreement’ situation. There is nothing but friction.”

The vintage motorcycle trader

© Cameron Smith / FT

“We have always been global and we will survive but we are in a ‘no deal’ situation. There is nothing but friction.
Paul Jayson, Motorcycle Broker

In a meeting with ministers, Spurrell said he would leave the EU in favor of markets such as Canada.

But Spurrell said, “We shipped our first packages to consumers and within a week we had to stop shipping them to Canada after 14 packages were submitted for an additional 245 percent.”

Leaving the EU single market and the end of freedom of movement has also exacerbated growth shortage of workers in the United Kingdom. According to the IoD survey, more than a quarter of companies said Brexit had caused difficulties in employment – 17 per cent complained of the loss of highly qualified staff, and 10 per cent of the lack of workers. low skilled.

Chart the bar of Ha your organization has had difficulty hiring due to a lack of candidates from the EU (% of responses) showing that one in four British companies has had difficulty in hiring staff from the EU

British companies have been forced to launch operations in the EU to serve the European market, but this has led to higher costs and the transfer of jobs from Britain to the EU. Nearly a quarter of companies trading with the EU have had to transfer some operations or personnel, according to the IoD survey.

Laura Rudoe, who runs Evolve Beauty, an economic beauty company in Hertfordshire, said she had set up a store in Ireland to export to the EU and serve her customers on the block reliably. She said this had introduced “additional costs, time and documentation”.

“Since Brexit, we have found that some key markets are closed to us,” adds Rudoe.

The brand of economic beauty

© Charlie Bibby / FT

“Since Brexit, we have found that some major markets are closed to us.”
Laura Rudoe, Evolve Beauty

Clothing retailer Rivet & Hide plans to direct goods across the Netherlands to minimize costs.

Danny Hodgson, founder of the London Society, said: “The effort in terms of time and mental bandwidth to try to maintain our EU activity is exhausting – I have almost given up on several occasions but I will not give up. this government defeats me. “

Hodgson said the additional duties, value added tax and shipping costs have caused the prices of his company’s assets going to the EU to increase by 30 to 40 percent. As a result – after growing at 20 per cent a year in the EU before Brexit – trade to European countries has more than halved.

The CMI found that executives of small and medium-sized enterprises were much more likely to report that the end of the Brexit transition period had a negative impact on the turnover of their firms – at 35 per cent – compared to those of large organizations at 23 percent.

The seller of clothes

© Anna Gordon / FT

“The effort in terms of time and mental bandwidth to try to maintain our EU activity is tiring – I have almost given up on several occasions.”
Danny Hodgson, Rivet & Hide

Many were forced to cut jobs. Alfred van Pelt, general manager of Something Different, which distributes clothing, gifts and other merchandise to small retailers and visitor centers across Europe, has halved its workforce since Brexit.

Last year the 30-year-old Somerset-based distributor sent 2,500 packages to EU customers every day at peak trading times in November and December. Now, the company sends about 100 to 150 – “if we’re lucky,” van Pelt said.

The problem is the cost and the border procedures that EU customers are reluctant to shoulder. The value of the packages may be low – less than £ 30 each – but the costs amount to £ 8 for shipping and £ 17.50 for covering import declarations.

“It threw our business off the edge of the cliff,” said van Pelt, who had to lay off nine of his 20 staff. The company tried to expand in the UK but with three quarters of its sales last year in the EU, it was an upward task.

Without Brexit, the company would have employed more full-time staff in the UK, he said, since its EU-based owner had planned to invest in its operations. “The majority of our EU customers have just given up,” he added.

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