Mark Brearley is still frustrated by Brexit. More than a year from Britain’s formal withdrawal from the EU, on terms agreed by Boris Johnson’s government, exporting the goods his company produces hasn’t got any easier for the London-based manufacturer.
Describing it as “the same nightmare week after week”, he says: “A lot more time is spent with things going wrong. The EU really feels like the hardest place in the world to ship things to sometimes.”
For the past seven decades the company Brearley runs, Kaymet, has made and sold tea trolleys, trays and hotplates from its factory just off the Old Kent Road to customers including the British royal family. It’s thought that Kaymet’s wares were used by the queen – celebrating her platinum jubilee this week – on her coronation world tour. The company sells goods in 40 countries across the world.
But leaving the EU has added to Brearley’s costs and makes selling items abroad more difficult. “There’s loads of things I could’ve been doing if it wasn’t for these problems. We could do things that take us forward, rather than back,” he says.
Official figures show that UK exports to the EU remain significantly below pre-Brexit levels, despite some recovery from an initial plunge in January 2021 at the end of the transition period.
Exports had fallen 40% on the month as traders adapted to new red tape and border delays, but came back to finish last year down 11% compared with 2018 – the year used by the Office for National Statistics as the most reliable comparison, before Brexit stockpiling and the Covid pandemic influenced trade flows.
However, concern is mounting that fresh Brexit roadblocks are looming as the government threatens to tear up the Northern Ireland Protocol, which covers trade between Great Britain, Northern Ireland and Ireland. Despite Boris Johnson claiming to have “got Brexit done”, his government now views this central plank of his deal as broken.
“There’s a sense of, ‘Oh God, here we go again,”’ says Brearley, who worries that Kaymet will suffer if the EU responds with fresh trade barriers.
Raoul Ruparel, who was Theresa May’s special adviser on Europe during the first round of Brexit negotiations, says companies could start dusting down their old no-deal Brexit plans if the situation worsens.
“Any business will tell you it’s unhelpful,” he says. “In this case, a lot of them are just getting on with it and they just have to make the best of it. But what they don’t want is constantly changing trade rules with the UK and the EU.”
Despite business concerns of retaliation from Brussels, the government has insisted that pushing ahead is the right thing to do. “The UK’s solution to fix the problems with the protocol and protect the Belfast [Good Friday] Agreement will cut costs for businesses, remove unnecessary paperwork and protect UK and EU markets,” a spokesperson said.
There could, however, be economic costs. Steffan Ball, the former chair of Philip Hammond’s council of advisers when he was chancellor, and now chief UK economist at Goldman Sachs, says the most likely outcome is a “compromise deal”. Still, risks of “significant economic impacts” loom if one isn’t reached, he warns.
“Back in 2020, the Office for Budget Responsibility [OBR] estimated that a ‘no-deal’ Brexit would reduce the level of real GDP by an additional 2% in the long run. In addition, the escalation in tensions raises the prospect of a trade war, with potential tariffs imposed on exports to the EU,” he says. “But this outcome is very unlikely in our view.”
Even with the current deal, the OBR – the Treasury’s economics forecaster – expects Brexit to cost the economy 4% of GDP over 15 years, double the long-term impact of the scarring from the Covid pandemic.
Trade figures suggest UK exporters are already feeling the pinch. According to the Netherlands Bureau for Economic Policy Analysis, which tracks trends in global trade, goods exports in March from advanced economies – including the UK, US, Japan and euro area – were 2% above the monthly average for 2018, after adjusting for inflation. In the UK, however, real exports were almost 22% down in the same month.
Some sectors have suffered a more dramatic hit than others. Exports of clothing and footwear to the EU are both down by almost 60% compared with 2018. Meat exports have plunged by almost 25%, vegetables and fruit by 40%, while car exports are down by more than a quarter.
Paul Alger, director of international affairs at the UK Fashion and Textile Association, says the outsize hit for his industry is probably because many of the items sold by UK firms do not qualify for the post-Brexit trade deal. Under its terms, goods must meet “rule of origin” requirements, which require a certain proportion of an item to be domestically produced to benefit from tariff-free access. However, much of the clothing sold by UK retailers is made in Asia or the US, making it ineligible.
“They’re also finding that customs are very difficult in some countries. Particularly around labelling,” said Alger. “A lot of companies will say we didn’t realise how good a deal we had for moving goods from the UK to the EU until we actually left.”
In one example of shifting trade patterns, Marks & Spencer is setting up a warehouse to handle EU deliveries of clothing and homewares to reduce the impact of tariffs and export costs. The British high street stalwart said last week that Brexit had cost it £29.6m in profits and £15m in lost trade.
Danny Hodgson runs Rivet & Hide, which sells quality men’s clothing from stores in London and Manchester as well as online. He says EU sales, which he spent a decade building, plunged by half in the first month after Brexit and never recovered.
“It’s really frustrating,” he says. Rivet & Hide has pushed up prices for EU customers to include new tariffs, VAT and shipping costs.
“I hear Johnson boasting about free trade and all the rest of it. I don’t know how he’s got the brass neck to talk about us doing free trade when basically he’s the one who’s imposed sanctions on our business. “We were freely trading with the EU and now we’ve had tariffs imposed on us through our Brexit deals.”
With Britain’s economy facing the risk of recession amid the cost of living crisis, Hodgson says the government has caused harm to the British economy that could have easily been avoided.
“We’re less profitable, there’s a lot more work involved, there’s a lot more hassle, but I’m still slogging away at it in the hope one day things improve,” he says. “But if there was a trade war, it would finish that off.”