LONDON – As Brexit becomes a reality through the new year, Tony Hale has encountered the pitfalls of Europe’s redesigned geography. He specifically faced the need to extract 53 tons of rotting pork products from an administrative purgatory in a port in the Netherlands.
For more than two decades, Mr. Hale’s company sent pork to the European Union without customs controls, as if the UK and the mainland across the water were one vast country. As Britain was now legally out of the block, exporters suddenly had to work through inspections, safety regulations and a staggering amount of paperwork.
For mr. Hale means wrong documents to send five containers full of pork to an unplanned final destination – the incinerator.
“This is a new game, and we need to learn the rules,” he said. Hale said. “We need to double and double every document.”
In the early days of the post-Brexit era, Britain was struggling to adapt to its new position in the world economy – its fate was still tied to the European Union; its companies on the outside. The trade agreement that Britain concluded with the European Union at the end of last year halted tariffs on goods exchanged across the English Channel, but did not include the revival of customs procedures, health and safety controls, value added tax on imports and other time does not prevent. -consuming, trade-restricting barriers.
Businesses across Britain are now struggling with crippling confusion and unknown bureaucratic hurdles. Paperwork snuff, customs atrocities and other costly disruptions are stepping up tensions in an economy that has already fallen from the pandemic.
The Office of National Statistics announced on Friday that Britain’s economy had shrunk by almost 10 per cent last year, the worst jump in centuries. Economists expected a strong expansion later this year, as Britain’s vaccination campaign – among world leaders – would return to normal, but Brexit-related accidents are likely to limit the upside.
Prime Minister Boris Johnson, a Brexit champion, portrayed Britain’s independence from Europe as a strong point in enabling the government to move quickly on its vaccination action. Administration officials have kept Brexit problems to a minimum, describing them as ‘dental problems’ that will disappear once businesses have mastered the complexity of the new procedures.
But many companies – especially small and medium-sized businesses – deplore what feels like a new normal.
The European Union has traditionally bought almost half of Britain’s exports. Exports that crossed the canal in January collapsed by more than two-thirds compared to the previous year. Some producers of fish, shellfish, meat and dairy products have been cut off from the markets in Europe and have experienced disastrous sales.
Transport companies are so wary of the complexity of shipping goods from Britain to Europe, that many people avoid the business. About half of all trucks transporting goods from the French port of Calais to the English port of Dover now return empty-handed and transport nothing but thin air.
In Britain’s lucrative financing industry, the shares of European companies have suddenly shifted to the mainland, as Amsterdam has supplanted London as the primary market for such shares. Growing volumes of the exotic instruments known as derivatives – especially those denominated in euros – are leaving London for New York.
Manufacturers have serious disruptions in their inventory of final products, components and basic materials.
And the changes brought about by Brexit are only beginning, as London and Brussels continue to renegotiate the rules for future commercial trade across the canal.
“We’ll be living together at Brexit for the rest of our lives,” said Jeremy Thomson-Cook, London’s chief economist, Equals Money, an international money manager. ‘The coronavirus is an acute condition. Brexit is chronic. ”
Crossing the canal
During the 2016 Brexit referendum campaign, those in favor of leaving Europe freed businesses from the suffocating regulations and time-consuming bureaucracy that apparently rules the Channel.
James Wilson was doubtful. He harvests mussels from the seabed of Menai Strait in north Wales. Traditionally, such mollusks are not loved by the British, making him 98 percent dependent on Europe.
Mr. Wilson expected extra paperwork. He was unprepared for the shock he received last month during a Zoom call with the Shellfish Association of Great Britain: According to European rules, the import of live mussels is only allowed from outside the block if it is harvested in waters belonging to the highest quality is considered. The Menai Strait fell short – and not because of European perfection, but under the British classification system.
He was locked out of his only market.
“It was as if someone unexpectedly knelt in your groin,” he said. Wilson said.
A few hundred tons of mussels that would previously fetch about 160,000 euros ($ 194,000) are now lying in the stone, and it is not worth harvesting. Mr. Wilson captured three of his six workers.
Even those who can reach European markets have discovered that the promised bonfire of regulations is actually a burning hell of paperwork.
In the south-west of England, a few miles from the town called Cheddar Cheese, one cheesemaker, Lye Cross, expects an extra £ 125,000 ($ 173,000) a year to meet the administrative requirements that accompany Brexit. has. Ben Hutchins, the company’s sales and marketing director, says a transaction that included seven steps last year, including payment and invoicing, now amounts to 39.
During the first week of January, Hartington Creamery shipped about 40 small packets of its Stilton cheese to Europe. Together they were worth about £ 1,000 ($ 1,383). The courier made a surcharge of about £ 5 each after Brexit, or about £ 200. Customs authorities in Europe have rejected the deliveries, mainly because they do not have the necessary health certificates. The preparation of such documents involves hiring a veterinarian for about £ 180 per consignment.
Hartington repaid his customers and paid the courier again to deliver the cheese back to England.
“You feel pretty sick,” said Robert Gosling, the company’s majority shareholder. “If you have it back, you have to throw it all away, because it took five or six days to get there and come back.”
Before Brexit, a truck loaded with 25,000 liters of cream from a dairy plant in north Wales could travel overnight and reach France early in the morning. The same trip could now take five days, complains Philip Langslow, director of County Dairy Products.
The dairy must inform the authorities at least 24 hours before departure of the export and must deliver a weight – something he cannot know for sure before unloading the tanker. If its weight differs from what is stated on the paperwork, the consignment may be rejected on arrival. Mr. Langslow’s company halved its exports.
“Antigua is easier than Amsterdam,” he said of some export orders.
Supply Chain Problems
Before Brexit, Fashion Enter, an e-commerce company with a few factories in Britain, was able to place an order for high-quality yarn made in Germany and receive it in perhaps five days.
A recent order lasted more than three weeks. It also incurred a handling cost of £ 44 pounds (more than $ 60) to cover the preparation of customs paperwork.
Without the wire, the company had to postpone work on an important assignment – 10,000 protective gowns for medical workers in the front line at the National Health Service.
The wire supplier is now charging a minimum amount of £ 135 ($ 185) on orders from Britain, knowing that a lower amount requires him to register to pay UK value added tax, said Jenny Holloway, Fashion Enter’s executive chief, said.
Like many fashion businesses, her business wants to keep its stock slim so that it can adapt to changing demands of the customer. But the new minimum order has forced the company to take up more inventory so that it no longer touches on something it cannot replenish quickly.
“It’s going to tie us up in cash,” she said. Holloway said. “This is the new business we are in.”
The automotive industry is particularly vulnerable, as parts frequently cross the canal and cross again for specialized processing before ending up in finished vehicles. Factories now have to fill out paper outlining the origin of what they send.
Nearly two-thirds of the small and medium-sized manufacturing companies in England have suffered increased costs since the start of Brexit, according to a survey released by the South West Manufacturing Advisory Service on Monday.
In the industrial suburbs of Birmingham, a company called Brandauer prints metal sheets in precision parts for automobiles and household appliances. The company recently developed a prototype for a British carmaker developing an electric vehicle. It has contracted with a factory in Switzerland, which is not an EU member, to handle an important piece of work.
Before Brexit, Brandauer would have received the part back within a day or two. This time, crossing the EU territory in both directions, it lasted more than three weeks.
“The route from Switzerland to the UK is just chock-full of these problems,” said Brandow chief executive Rowan Crozier.
The movement of money
Although the trade agreement between Britain and Europe repelled tariffs on goods, it exposed most of the British economy – the services sector and especially finances.
In recent decades, multinational banks and asset managers in London have joined forces and transformed the city into a global financial center that competes with New York. Brexit put that status in play. With the departure of the European market, companies in Britain lost the right to handle transactions for customers in Europe. Many companies have already relocated staff and investments to European capitals such as Frankfurt, Dublin and Paris to ensure they can continue there.
“They saw this car coming towards them in slow motion,” said William Wright, founder of New Financial, a research institution in London. “Most large companies and all national and EU regulators have been working furiously on this for the past four and a half years.”
The first day of trading in 2021 revealed one important change: In response to European requirements for investors in shares of publicly traded companies on European stock exchanges, shares worth 6 billion euros ($ 7.3 billion) moved from London to the markets on the mainland.
European regulators will start next year demanding that derivatives be settled in euros within the bloc – a business now dominated by London.
For one London brokerage firm, TP ICAP, Brexit and the pandemic have stimulated some of its operations.
Three years ago, the company set up a subsidiary in Paris to ensure that it continues to do business on the continent after Brexit. By the beginning of the year, it had 230 brokers in the European Union, but another 100 had yet to move.
Last month, the company announced that its relocation plans had been delayed by the pandemic. The firm asked French regulators for extra time. The Frenchman said no, forcing TP ICAP to suspend some transactions for European clients while scrambling to get its people in position.
Amid the pandemic, Brexit has forced the company to move numerous employees and their families across a channel that suddenly seems wider.