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Brexit 6 weeks on

 

Policy Adviser, Tom Kennedy in his latest for The Journal

It has now been almost six weeks since the UK began its new relationship with the EU. On 1 January 2021, the EU-UK Trade and Cooperation Agreement (‘the TCA’ to people who spend too much time reading about trade) came into force as the UK left the European Single Market and Customs Union. The deal was announced as a triumph that maintained tariff and quota-free trade between the UK and Europe, but the reality for many of our region’s businesses has been different.

New Rules of Origin mean that only goods classed as UK or EU origin qualify for tariff-free trade. This means that many goods that moved tariff-free between the UK and Europe in December, can no longer do so. Goods that are eligible for tariff-free trade must now go through additional steps to prove that they are of UK origin– the trade equivalent of getting ID’d at the bar.

The UK leaving the European VAT regime has added confusion to business operations and has had a huge impact on business cashflow, at a time where COVID already squeezed this to the point of squeaking.

Finally, a huge new burden of customs paperwork has left many businesses drowning in bureaucracy and uncertain of whether they are doing everything right – so much for ‘no more red tape’.

With the deal being announced on Christmas Eve and coming into force only 8 days later, businesses had little time to adapt and the overall result has been confusion, uncertainty and many businesses not trading at all.

Another result of signing the world’s first ‘Free Trade Agreement’ that actually raises barriers to trade, is that the UK can no longer freely trade within its own territory – ask any North East business who sends goods to Northern Ireland for confirmation on that.

It is important to point out that each week in January was better than the one before, as businesses’ understanding of the deal grew. Over time, it will become clear what issues are ‘baked in’ to the deal, giving businesses headaches for years to come, and which are ‘teething problems’ that will get easier with practice.

North East traders will keep up their end of the bargain and adapt to the new trading environment; the task of government is to ensure that when the new relationship presents businesses with a significant obstacle, that the right guidance, support, and funding is available to help our exporters drive the UK’s recovery from COVID-19.