UK exporters consider 'worst case scenario' plans

Many exporters to the EU are still struggling with the added cost and complexity of shipping goods to the UK's largest export market, three months after the new post-Brexit border procedures kicked in.

An initial 41% plunge in goods going to the EU in January was described by the government as "teething problems" which it said were hard to separate out from the impact of COVID-related disruption.


The government insists that "overall freight volumes between the UK and the EU" have been back to their normal levels since the start of February, and that there is no general disruption at UK ports.


However, haulage groups insist recent figures on freight volume tally the number of vehicles and ferry movements, rather than the value of the actual goods traded between the EU and UK and many more lorries than before are returning to the EU empty.


An admittedly small sample of members of the Federation of Small Business found that one in four exporters had paused sales to the EU and 11% were considering abandoning exports to the bloc completely.


Unsustainable


Scott Clarke is a director at Rex London, a specialist gift company selling goods all over Europe. He described January as "chaotic". There were delays and confusion at customs, additional freight costs, and extra charges for his EU customers in the form of duties and taxes. Many of his shipments weren't getting through at all and were returned to his warehouse in west London.


"We had hundreds of boxes we tried to send in January, and they all came back," says Scott.

"There was probably a three or four week period at the beginning of the year where we couldn't supply our customers at all, which is a big deal for us because over half of our business is with Europe."


He acknowledges that things have got better, but many of the difficulties they have faced are here to stay.


"It has calmed down a lot. We can supply our customers in Europe now. But we're three months in, and this doesn't seem sustainable in the longer term," he adds.


"There's been a lot of talk about teething issues. There were teething issues, but they were just part of the underlying problems that haven't gone away."

'Everyone loses'


What's the solution? For Scott, it's to establish a warehouse in Belgium so he can better serve his customers in Europe, without customs delays and extra costs. It's something they previously saw as a "worst case scenario" option, and he says there'll be negative consequences for the UK.

"Splitting off part of our business and sending it to Belgium probably means that further growth is going to be happening there. Instead of taking on new staff here, we'll employ them there. Instead of making more profit and paying more tax here, we'll pay it there. Basically, everyone is losing out here," he says.


He's not the only one looking at establishing a base in the EU. The BBC has spoken to a number of investment agencies around Europe - including in Germany, Belgium, Austria and France. All of them say they've seen a big increase in the number of UK businesses expressing an interest in moving some of their operations across the channel. The Netherlands is emerging as a favourite destination.


Michiel Bakhuizen is from the Netherlands Foreign investment Agency. They have been in talks with over 600 UK businesses since the Brexit referendum, and the monthly numbers have increased since the start of this year.


"In January, 40 companies made enquiries, in February it doubled to 80 companies, and up until the middle of March it was 40 again, so interest is really growing. The numbers have more than doubled on the average month in 2020," says Michiel.


"Interest has grown since January, because of the real difficulties Brexit is causing some companies in the UK. They're talking about administrative hurdles, supply chain related problems, licensing issues, so those problems are real and that's why those companies are showing interest in the Netherlands and other countries."


Michiel is keen to point out there are downsides for the Netherlands too.


"The Netherlands is not 'winning' this. If you look at Brexit from a macro perspective, the Netherlands just lost its second biggest trading partner, moving outside the European Union and the single market," he says.


"Obviously attracting foreign business towards the Netherlands is growing because UK businesses need a future in the European market, and the Netherlands is there to help them to secure that, but in the end Brexit is not good news for the Netherlands."


Source: BBC News