LONDON – While the New Year made Brexit a reality, Tony Hale found the pitfalls of Europe’s redesigned geography. Specifically, he faced the need to remove 53 tons of rotten pork products from the administrative purgatory of a port in the Netherlands.
For more than two decades, Hale’s company shipped pork to the European Union without customs controls, as if the United Kingdom and the continent across the water were a single country. With Britain now legally out of the bloc, exporters suddenly had to deal with inspections, safety regulations and a bewildering mess of paperwork.
For Mr. Hale, incorrectly prepared documents meant sending five containers full of pork to an unplanned final destination – the incinerator.
“It’s a new game and we have to learn the rules,” said Hale. “We are having to check each document two or three times.”
In the early days of the post-Brexit era, Britain is struggling to adapt to its new position in the global economy – its fortunes are still tied to the European Union; their companies outside. The trade agreement that Britain signed last year with the European Union prevented the imposition of tariffs on goods exchanged by the English Channel, but it did not prevent the revival of customs procedures, health and safety checks, value added taxes on goods. imports and others – consumption obstacles and trade restrictions
Businesses across Britain now face paralyzing confusion and unknown bureaucratic hurdles. Paperwork confusion, customs horrors and other costly disruptions are intensifying tensions over an economy that was already recovering from the pandemic.
On Friday, the Office of National Statistics announced that the British economy contracted nearly 10% last year, the worst drop in centuries. Economists predicted a robust expansion later this year, as Britain’s vaccination campaign – among world leaders – yields a return to normal, but Brexit-related accidents are likely to limit the positive.
Prime Minister Boris Johnson, a champion of Brexit, portrayed Britain’s independence from Europe as a force to allow the government to move forward quickly in its vaccination campaign. Management officials have minimized Brexit problems by describing them as “initial problems” that will decrease once companies have mastered the intricacies of the new procedures.
But many companies – especially small and medium-sized businesses – lament what appears to be a new normal.
The European Union traditionally buys almost half of Britain’s exports. The volume of exports that crossed the channel in January fell by more than two-thirds compared to the previous year. Some producers of fish, crustaceans, meats and dairy products were excluded from markets in Europe, suffering a catastrophic drop in sales.
Transport companies are so suspicious of the complexities of shipping goods from Britain to Europe that many avoid the deal. Almost half of all trucks that bring goods from the French port of Calais to the English port of Dover are returning empty, carrying nothing but air.
Britain’s lucrative financial sector has seen European stock trading shift abruptly to the continent, as Amsterdam has replaced London as the main market for these stocks. The increasing volumes of exotic instruments known as derivatives – especially those denominated in euros – are swapping London for New York.
Manufacturers are facing severe disruptions to their supplies of finished products, components and basic materials.
And the changes imposed by Brexit are just beginning, as London and Brussels continue to renegotiate the rules that govern future trade negotiations across the channel.
“We are going to live with Brexit for the rest of our lives,” said Jeremy Thomson-Cook, chief economist at Equals Money, an international fund manager in London. “Coronavirus is an acute condition. Brexit is chronic. “
Crossing the Channel
During the 2016 Brexit referendum campaign, supporters of leaving Europe pledged to free companies from the stifling regulations and lengthy bureaucracy that supposedly prevailed across the Channel.
James Wilson was in doubt. He harvests mussels at the bottom of the Menai Strait in northern Wales. Traditionally, these mollusks are not loved by the British, making them dependent on Europe for 98% of their sales.
Mr. Wilson anticipated the extra paperwork. He was unprepared for the shock he received last month, during a call from Zoom to the Seafood Association of Great Britain: Under European rules, imports of live mussels were allowed outside the block only if harvested in waters considered to be high-quality. The Menai Strait fell short – not because of European perfidy, but under Britain’s own classification system.
It was excluded from its only market.
“It was as if someone had unexpectedly kneed you in the groin,” said Wilson.
A few hundred tons of mussels that previously would have yielded around 160,000 euros ($ 194,000) are now in the mud, not worth harvesting. Mr. Wilson released three of his six workers.
Even those who can reach European markets have found that the promised bonfire of regulations is actually a hell of burning paperwork.
In southwest England, just a few kilometers from the village that gave its name to Cheddar cheese, a cheesemaker, Lye Cross, plans to spend an extra £ 125,000 ($ 173,000) a year to meet the administrative requirements that accompanied Brexit. A transaction that last year involved seven steps, including payment and billing, now reaches 39, said Ben Hutchins, the company’s director of sales and marketing.
During the first week of January, Hartington Creamery shipped about 40 small packages of its Stilton cheese to Europe. Collectively, they were worth around £ 1,000 ($ 1,383). The courier posted a post-Brexit surcharge of around £ 5 each, or about £ 200. Europe’s customs authorities rejected the shipments, mainly because they lacked the required health certificates. The preparation of such documents involved hiring a veterinarian for about £ 180 per consignment.
Hartington repaid his customers and paid the messenger again to return the cheese to England.
“You feel really bad,” said Robert Gosling, the majority shareholder in the company. “When you have it back, you have to throw it all away because it took five or six days to get there and back.”
Before Brexit, a truck loaded with 25,000 liters of cream from a dairy in northern Wales could travel overnight and arrive in France in the morning. Now, that same trip can take five days, complained Philip Langslow, director of County Milk Products.
The dairy must alert the export authorities at least 24 hours before departure and provide a weight – something you may not know for sure until the tanker is loaded. If the weight is different from that stated on the paperwork, the shipment may be rejected on arrival. Langslow’s company cut its exports in half.
“Antigua is easier than Amsterdam,” he said of some export orders.
Supply chain problems
Before Brexit, Fashion Enter, an e-commerce company with two factories in Britain, could place an order for high-quality yarns made in Germany and receive them in perhaps five days.
A recent order took more than three weeks. It also incurred a handling fee of £ 44 pounds (more than $ 60) to cover the preparation of customs paperwork.
Without the cord, the company had to postpone work on a crucial order – 10,000 protective aprons for frontline medical workers at the National Health Service.
The line supplier now imposes a minimum of £ 135 (US $ 185) on Britain’s orders, aware that a lower amount would require her to register to pay British value added taxes, said Jenny Holloway, executive director of the line. Fashion Enter.
Like many fashion businesses, your company aims to keep its stock lean, allowing it to adapt to new customer demands. But the new minimum order has forced the company to stock more, so as not to run out of something it cannot replace quickly.
“It will tie up our money,” said Holloway. “This is the new business we are in.”
The automotive industry is especially vulnerable, as parts often cross and cross the Channel several times for specialized processing before landing on finished vehicles. Factories must now complete the paperwork outlining the origins of what they are shipping.
Nearly two-thirds of small and medium-sized manufacturing companies in England have experienced increased costs for imported components since Brexit went into effect, according to a survey to be released on Monday by the South West Manufacturing Advisory Service.
In the industrial suburbs of Birmingham, a company called Brandauer presses sheet metal into precision parts for cars and appliances. The company recently developed a prototype for a British automaker that is developing an electric vehicle. He signed a contract with a factory in Switzerland, which is not a member of the EU, to take care of a key part of the work.
Before Brexit, Brandauer would have received the piece back from Switzerland in a day or two. This time, crossing EU territory in both directions, it took more than three weeks.
“Switzerland’s route to the UK is fraught with problems,” said Rowan Crozier, CEO of Brandauer.
The Money Movement
Although the trade agreement between Britain and Europe avoided tariffs on products, it exposed the bulk of the British economy – the service sector and, especially, the financial sector.
In recent decades, multinational banks and asset managers have flocked to London, turning the city into a global financial center that rivals New York. Brexit put that status at stake. Upon leaving the European market, British companies lost the right to handle transactions for customers in Europe. Many companies have already transferred employees and investments to European capitals like Frankfurt, Dublin and Paris to ensure that they can continue to manage business there.
“They saw this car accident coming towards them in slow motion,” said William Wright, founder of New Financial, a research institution in London. “Most large companies and all national regulators and EU regulators have been working hard on this for the past four and a half years.”
The first day of trading in 2021 revealed a major change: in response to European requirements that investors within the bloc should trade shares in publicly traded companies on European stock exchanges, shares worth 6 billion euros ($ 7.3 billion) ) were transferred from London to mainland markets.
European regulators will require, starting next year, that derivatives quoted in euros be settled within the bloc – a business now dominated by London.
For a London-based broker, TP ICAP, Brexit and the pandemic have combined to halt some of its operations.
Three years ago, the company opened a subsidiary in Paris to ensure that it could continue to do business on the continent after Brexit. At the beginning of the year, there were 230 brokers in the European Union, but another 100 still needed to move.
Last month, the company announced that its relocation plans were delayed by the pandemic. The company begged French regulators for more time. The French said no, forcing TP ICAP to temporarily suspend some transactions for European customers as it struggled to put its people in position.
In the midst of the pandemic, Brexit forced the company to transfer many employees and their families through a channel that suddenly seems wider.