Post-Brexit trade rules are having a real impact on cross-channel logistics, writes John Wegman (pictured), CEO of a full-service digital customs partner, Customs Support.
Since the UK’s departure from the EU single market in 2021, European businesses have had to adapt to a shifting reality – one where increased paperwork, constantly changing trade dynamics and new regulatory requirements have made things complex. Whilst the EU-UK Trade and Cooperation Agreement (TCA) should have simplified things in theory – upon allowing for tariff-free trade on most goods – in practice, supply-chains are still complicated, with European industries left grappling with a host of frictions and challenges.
A new trade panorama
Despite Brexit, the UK remains one of the EU’s largest trading partners, with the EU accounting for 52% of UK imports last year, according to The House of Commons Library. Trade in goods exports to the UK has nonetheless fallen by approximately 15% since 2021 – with imports from the UK down by 22% over the same period of time – according to the latest figures from Eurostat. This is largely due to heightened regulatory requirements and non-tariff barriers, such as customs checks.
Many industries – particularly those dealing with perishable goods such as agrifood – have been hit the hardest, with a 2023 report from the European Association for Food and Beverage pointing to a 20% reduction in EU food and drink exports to the UK since Brexit. Businesses are citing customs delays and increased paperwork as the primary culprits.
The red tape burden
One of the most significant impacts on trade has indeed been the increase in administrative and regulatory hurdles. The TCA may have eliminated tariffs on most goods, but it still introduced substantial non-tariff barriers that have affected supply-chain operations. Many European exporters now face increased customs checks, paperwork and compliance requirements for proof of origin, for example, whereby it’s moreover necessary to ascertain that goods contain a minimum percentage of EU or UK-produced components in many cases to qualify for tariff exemptions.
This has resulted in significant delays and increased costs for businesses large and small, particularly when they are involved in complex cross-border logistics. The Centre for European Reform actually found that customs paperwork and delays add an estimated €10 billion annually to the cost of trading with the UK, as confirmed by a European Logistics Association study. The increased burden has prompted some EU firms – particularly small and medium-sized enterprises – to reconsider their trade relationships with the UK entirely.
From labour shortages to supply-chain bottlenecks
In addition to these regulatory challenges, European supply chains have also felt the impact of Brexit-induced labour shortages. The UK’s end to free movement for EU workers ultimately led to a significant reduction in the available workforce industry wide – and for sectors such as transport, food production and hospitality, this loss of 100,000 + EU workers has resulted in additional delays and bottlenecks affecting service delivery and supply. Logistics companies have likewise struggled, with a shortage of HGV drivers causing further setbacks, reducing the efficiency of trade between the EU and the UK. Although certain workers have been granted a temporary visa in order to alleviate these shortages, reliable, timely cross-border operations remain a major challenge.
The cost of trade friction
Of course, the consequences of Brexit are also being felt by manufacturers and consumers, with the European Business Council reporting that over 60% of EU-based companies still trading with the UK are facing increased operating costs and longer lead times due to regulatory frictions. This has translated into higher priced goods, with manufacturers passing on additional costs to consumers as they grabble with rising import expenses. Industries relying on just-in-time supply chains, where companies are moving parts and materials as and when needed for the manufacturing process rather than stockpiling, have generally been hit the hardest.
A complex future for EU-UK trade?
Almost three years after Brexit, EU-UK supply chains are still unsettled, with non-tariff barriers, labour shortages and regulatory complexities standing in the way of smooth trade. Many SMEs in Europe continue to grapple with new customs rules and compliance demands, which are consistently changing, leading to some limiting or even pausing UK trade. The additional burden of extra paperwork on top of this has only made things more difficult, particularly for sectors with tight margins and high-frequency shipments – like agrifood and manufacturing.
Thankfully, it is possible to streamline EU-UK trade with the right expert support. For European and UK businesses alike, adapting to the new environment successfully requires knowledgeable support and advice from seasoned customs and logistics experts who know how to navigate – and keep up with – regulations on supply. Despite adding an extra step to the trade process, at a slight cost, this expertise ultimately saves money and prevents delays over time, upon helping businesses to remain compliant, without the need to wait for paperwork, pay fines and go through the whole process again should things go wrong. Remaining agile will be essential as we move forward and the support available to manage upcoming complexities is key to remaining competitive.
Streamlining trade
Ultimately, although Brexit has introduced new challenges, efficient and effective trade with the UK is still possible. It simply requires a pragmatic approach, combined with the right support through customs advice and logistics partnerships. Once this is in place, EU and UK businesses alike can continue to thrive, as both sides of the political agreement continue to reassess policies and streamline supply chains. It should all make for smoother cross-border operations in the years to come.
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