Brexit is going to have a significant effect on the trade of goods between the UK and the EU. If your business relies on goods imported from the EU, whether by you directly or through your supply chain, you need to take action to ensure that your supply is not disrupted.
For decades, exporting and importing goods within the EU has been tariff-free and largely paperwork-free. That is about to change. As the UK is leaving the EU Single Market and the Customs Union, any future trade agreement will not deliver the same level of frictionless trade UK businesses have become accustomed to.
Whilst the UK economy is dominated by the service sector, which accounts for 80% of GDP, many services, such as retail and hospitality, depend heavily on the reliable supply of goods.
Trade with the EU does not actually reflect the UK’s service dominated economy. Goods make up the majority of the UK’s trade with the EU, accounting for 57% of the UK’s exports in 2019, with £168 billion of goods exported by UK businesses to the EU.
The largest part of the proposed trade agreement is a tariff-free agreement on goods. If agreed, that would avoid additional tariffs which would otherwise make imports to the UK more expensive. But it will not do away with friction at the border.
With the UK out of the Single Market and the Customs Union, physical inspections of goods for conformity with product safety standards and additional paperwork, such as customs declarations, will still be required at the border regardless of a free trade agreement.
The UK government has published how it intends to mitigate problems at the border, including:
Even with this planning and additional government funding, the most optimistic of forecasters anticipate considerable difficulties and delays at the border ports.
If a free trade deal cannot be agreed, World Trade Organisation (WTO) terms will apply and tariffs will be payable on imports of many goods from the EU. UK businesses and EU exporters will have to factor these additional costs into their price negotiations and costs of imported goods will go up.
The UK already trades with much of the rest of the world on WTO terms:
The UK published its trading schedule with WTO in May this year, which will apply to imports from the EU in the event of no deal. Broadly, these impose lower or nil tariffs on products the UK does not already produce or manufacture and a higher tariff where it has domestic supplies it wants to protect. Full details of the tariffs and quotas are available on the WTO website. The different levels of tariffs mean that a no deal Brexit will a have varying effect on different parts of the UK economy depending on what type of goods are being imported.
Other changes to look out for are the immediate change to product liability rules which will make UK importers of EU products, rather than the EU manufacturer, liable for personal injury and damage to property caused by unsafe products. There are also new rules on labelling products imported from the EU and new requirements to demonstrate compliance with UK safety standards, which will be phased in from 1 January 2021.
Here are the practical steps your business can take to minimise the negative impacts of Brexit on importing goods from the EU:
Uncertainty is rarely beneficial to businesses but can present opportunities. The UK is about to enter a period of increased uncertainty and those businesses who take the time to understand what that future might look like and take proactive steps to plan for the likely outcomes will be best placed to succeed in post-Brexit UK.