On Friday the cost of Brexit being “done” began to be revealed, as the Office for National Statistics (ONS) released its export figures for January. In the first month since the end of the Brexit transition period, the UK’s exports to the EU dropped by 40.7 per cent.
This is partly the result of calculations that businesses themselves made before the chaotic, last-minute fudge of the Brexit deal. Without knowing what trade would be possible as the deadline approached, importers and exporters bought up warehouse space on both sides of the Channel and stockpiled weeks’ worth of products and supplies in order to be able to keep trading. This means that much of January’s exports were made in December.
But the drop between December and January – a reduction of more than £5bn in trade – is far too large to be accounted for by stockpiling alone. We are now seeing the outcome of the government’s failure to listen to businesses about Brexit or prepare them for its effects. As businesses struggle to cope with paperwork that has not been explained to them (and which in at least one case does not even exist), meat is being left to rot in containers, and fish and shellfish spends days decaying in transit.
Because EU goods do not face the same obstacles, half of the HGVs leaving Britain are now empty. A government that spent £4.4bn preparing for Brexit has left many businesses to cope almost entirely unaided with the fallout from this political project, during a global pandemic that has caused the cost of freight to rise like never before.
“All of the freight forwarders and the logistics businesses that I talk to have all said the same thing, that they’re drowning in paperwork”, says Jon Bumstead, a supply chain expert and founder of Neutral Supply Chain. “The shippers and the customers fundamentally do not know the rules, and the rules are complex and they change from commodity group to commodity group.” One company told Bumstead it has had to recruit 25 staff in Dublin to work full time on customs clearance alone.
For smaller companies, warehousing and extra admin staff are unaffordable or unavailable, so they have to work through confusing new processes themselves. For those exporting perishable goods, the delays introduced have made trading simply impossible.
Martin Laity runs Sailor’s Creek Shellfish, just across the Penryn estuary from Falmouth, Cornwall. His family have exported shellfish across the Channel for generations; in the Second World War his grandfather used his oyster boats to transport spies and arms into occupied France. Despite the pandemic, trade was good for Laity, his seven employees and the further 52 fishermen he employs indirectly. The company was on track to deliver 20 tonnes of scallops and oysters a week to France, until Britain exited the EU without securing a deal that allowed British businesses to sell the same shellfish into the EU that they had been exporting the previous week. Laity’s exports were entirely wiped out until last week, when he was able to send out 0.6 tonnes – a 97 per cent drop in weight, with two full days of extra administration.
The problem Laity and the rest of his industry face is not one that materialised when the transition period ended, or the deal was struck, or even when the referendum was decided. For 30 years, the shellfish industry has protested that British waters are classified – by the UK’s own regulators, not the EU – more stringently than in other countries. Just 1 per cent of waters are classified as “A” grade by UK regulators, while Spain and Ireland put much larger areas – roughly a third of their fisheries – in the top grade.
The UK’s shellfish has not changed physically in any way, but its new legal status means it must now be processed in purification tanks to be exported. Laity (who also makes these tanks) says it impossible to process the tens of thousands of tonnes of mussels the UK normally sends to France – and even if you could, “they’d be dead before they left the country”.
Laity says he and others in the industry were told by the government, for 18 months, that they would just need to fill out different paperwork – but the form never materialised. “It was either a lie, or a complete cock-up by Defra,” he told me, “because it doesn’t exist. It never existed.”
Nor does Laity know of anyone in his industry who has received any of the £100m promised to seafood producers and the fishing industry by Boris Johnson: “They haven’t given a penny to anyone.”
In other sectors, the picture is less bleak. In Leeds, Sound Leisure – another family firm, set up in 1978 and employing 70 people – manufactures classic jukeboxes, of which 60 to 70 per cent are sold to customers in the EU. When Chris Black spoke to me on Friday, he had that morning been dealing with a paperwork issue that had led to a £200 fine. Even non-perishable, high-value items such as Chris’s jukeboxes have been subject to long delays due to supply chain and export issues: “It got to a stage at one point where our freight forwarders were just saying, ‘Leave the machines where they are, because they might as well be stuck in your warehouse, rather than ours.’”
But Sound Leisure has also been one of the fortunate businesses that have been able to talk to the Department for International Trade and the British Chambers of Commerce about their issues, and he says both organisations have been “fantastic”. For Chris, the worst period was in 2019 and 2020, when parliament’s failure to reach a consensus led distributors to postpone their orders until they knew what they would actually cost: “The uncertainty prior to us coming out was doing more damage than actually coming out.”
Yet Chris also acknowledges that he is “doing better than most, for information”, and that many smaller businesses are swamped by the need to teach themselves new regulations and processes in the midst of an economic crisis. “It’s a bit overwhelming when you start looking at the government webpages and you have to follow this link, and it takes you to another link, and another link… if you just go on Google and start typing stuff in, you could lose yourself for weeks.”
The uncertainty for many businesses is far from over, however. The UK and and the EU continue to negotiate on financial services and fishing rights, while talks on other battered industries such as the arts have yet to start. The EU may announce this week that it is beginning infringement proceedings over the UK’s lack of checks on goods entering Northern Ireland.
“What businesses want to see,” says Adam Marshall, director general of the British Chambers of Commerce, “is an end to the damaging political rhetoric from both sides. For some UK firms, the continued problems with EU trade are threatening their very existence. It should not be the case that companies simply have to give up on importing from, or exporting to, the market next door.”
It took four years for Brexit to be “done” in the thinnest possible sense, but the example of Switzerland – which rejected EU membership in 1993 and has negotiated tersely with the bloc ever since – suggests that the results of this political project will be felt by businesses for years, if not decades, to come.