Almost a third of UK companies that trade with the EU have experienced a decline or loss of activity since post-Brexit rules took effect on January 1, according to a survey conducted for the Financial Times.
The survey, carried out by the Institute of Directors, also found that 17% of UK companies that previously negotiated with the EU have ceased – temporarily or permanently – since the start of the year.
The results paint a grim picture of trade deals with Europe, especially for small businesses that lack the resources to overcome trade barriers created by the UK’s departure from the single market and the union EU customs.
Six months after Brexit, companies said they continued to tackle new red tape introduced by the UK-EU trade and cooperation agreement. Although the Brexit deal, reached on Christmas Eve, confirmed the exchange of zero tariffs and quotas between Britain and the EU, the new deals force companies to comply with controls costly, customs controls and bureaucracy that added friction to trade.
Relations between the UK and the EU have also deteriorated due to a new trade border between Britain and Northern Ireland which requires checks on many goods crossing the Irish Sea, triggering violence in pro-British unionist communities in the region.
“Six months later, many companies are still grappling with the challenges of our new relationship with the EU,” said Jonathan Geldart, Managing Director of the Institute of Directors.
“Small and medium-sized enterprises in particular find it difficult to navigate the new export and import procedures with the bloc, while business leaders more generally report difficulties in recruiting following the end of the freedom to recruit. circulation. “
The IoD survey asked 651 companies to give their assessment of the impact of Brexit to date.
Among companies that trade with the EU, 31% said the new barriers since Jan.1 have 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, carried out for FT by the Chartered Management Institute, just over a quarter of private sector executives said changes to trade at the end of the Brexit transition period had negatively affected the figure. of their organization in January. Six months later, almost the same proportion – 26% – still said there had been a negative impact, and largely the same organizations.
“Private sector leaders have reported that post-Brexit business challenges always have a negative impact on their organizations’ bottom line,” said Ann Francke, CEO of CMI, who sought advice from 1,354 leaders in his investigation.
However, more than half of the leaders who took part in the CMI survey said that the initial challenges related to trade with the EU created at the end of the Brexit transition period had been resolved at least to a small extent. which suggests that many companies were starting to overcome first hurdles.
Some companies responding to the IoD survey sought to focus on the positive aspects of the UK’s exit from the EU: 17% of companies said Brexit made them more likely to invest in their business, vs. 15% who said it made them less likely to invest.
An anonymous contributor to the survey said: “I generally become more optimistic about the economy following Brexit, therefore more likely to invest in the future.”
But some UK companies have responded to Brexit by embarking on sweeping changes in their businesses, such as moving operations across the Channel.
Many companies believe the impact of the UK’s exit from the EU will worsen when some of the mitigation measures put in place to ease the Brexit transition end this year, including the introduction of controls imports at the British borders with the bloc.
According to the IoD survey, around two-thirds of companies said the new UK customs controls would have a negative effect on trade when implemented in January next year – six months after their supposed introduction.
For many companies, the hassle of the new bureaucracy already introduced was enough to convince them to give up EU business.
Last week, the Cheshire Cheese Company decided to stop wholesaling to the EU. The cost of shipping a shipment to the EU has risen from around £ 300 to over £ 1,300, marking the end of its once successful European trade.
Simon Spurrell, who runs the Macclesfield-based specialty cheese maker, said not only was shipping direct to 446 million European consumers no longer viable, “we can’t ship to Northern Ireland either.”
The specialist cheese maker
“The government has successfully removed us from the EU as a company, it is no longer commercially viable”
Simon Spurrell, Cheshire Cheese Company
He added: “The government has successfully removed us from the EU as a company, it is no longer commercially viable and our distributors in France, Spain and Germany are not interested in doing business with us in because of both the extra cost and the difficulty with the paperwork. “
Meanwhile, Totnes-based Motorcycle Broker – which bought all of its bikes from the EU – has completely stopped serving the region. About 15 percent of the company’s sales were made in the EU, according to Paul Jayson, who runs the vintage motorcycle dealer.
While Jayson now imports bikes from non-EU countries, such as Australia and the US, it can take months rather than days. “We have always been global and we will survive, but we are in a ‘no deal’ situation. There is only friction. “
The old motorcycle dealer
“We have always been global and we will survive, but we are in a ‘no deal’ situation. There are only frictions’
Paul Jayson, Motorcycle Broker
In a meeting with ministers, Spurrell was urged to ditch the EU in favor of markets like Canada.
But Spurrell said, “We shipped our first packages to consumers and within a week we had to stop shipping to Canada after 14 packages were subject to an additional 245 percent duty.”
The exit from the EU single market and the end of free movement have also exacerbated a growing shortage of workers in the UK. According to the IoD survey, more than a quarter of companies said Brexit caused hiring difficulties – 17% complained about the loss of highly skilled staff and 10% about shortages of low-skilled workers.
British companies were forced to move to the EU to serve the European market, but this resulted in higher costs and the transfer of jobs from Britain to the EU. According to the IoD survey, almost a quarter of companies that do business with the EU have had to relocate certain operations or their staff.
Laura Rudoe, who runs Evolve Beauty, an eco-friendly beauty business in Hertfordshire, said she has set up a warehouse in Ireland to export to the EU and serve clients in the block reliably . She said this had introduced “additional costs, time and paperwork.”
“Since Brexit, we have found that some key markets are closed to us,” Rudoe added.
The eco-responsible beauty brand
“Since Brexit, we have seen that some key markets are closed to us”
Laura Rudoe, Evolve Beauty
Clothing retailer Rivet & Hide plans to move the goods across the Netherlands to keep costs to a minimum.
Danny Hodgson, founder of the London-based company, said: “The effort in terms of time and mental bandwidth to try to keep our European business is exhausting – I almost gave up on several occasions but I won’t let go. this government defeat me. “
Hodgson said the additional duties, value-added tax and shipping costs had caused the prices of his company’s products destined for the EU to rise 30 to 40 percent. As a result, after increasing 20% per year in the EU before Brexit, trade to European countries has more than halved.
The CMI found that executives of small and medium-sized businesses were much more likely to report that the end of the Brexit transition period had a negative impact on their businesses’ bottom line – at 35 percent – compared to to those of large organizations at 23 percent. hundred.
The clothing retailer
“The effort in terms of time and mental bandwidth to try to keep our European business is exhausting – I almost gave up on several occasions”
Danny Hodgson, Rivet & Hide
Many have been forced to cut jobs. Alfred van Pelt, managing director of Something Different, which distributes clothes, gifts and other merchandise to small retailers and drop-in centers across Europe, has halved its workforce after Brexit.
Last year, the 30-year-old Somerset-based distributor sent 2,500 packages to EU customers every day at the height of trade in November and December. Today, the company is sending around 100 to 150 – “if we’re lucky,” van Pelt said.
The problem is the cost and border procedures that EU customers are reluctant to pay. Packages may be low in value – less than £ 30 each – but costs are £ 8 for shipping and £ 17.50 to cover import declarations.
“It threw our company over the edge of the cliff,” said van Pelt, who had to lay off nine of his 20 employees. The company has tried to expand in the UK, but with three quarters of its sales last year in the EU, the task has been uphill.
Without Brexit, the company would have employed more full-time staff in the UK, he said, given that its EU-based owner planned to invest in its operations. “The majority of our European customers have just given up,” he added.