We look at how the Brexit deal is progressing two months in and some of the trading problems that are becoming apparent.
As every parent knows, a child getting its first teeth means more than a few sleepless nights, which can seem to last forever but must eventually end: so the Government will be praying that Michael Gove’s diagnosis is correct and that the early post-Brexit delays affecting trade really are just teething problems. Ben Fletcher, the policy director of manufacturers organisation Make UK, has his doubts. He said: “People are starting to realise how hard it will be to build rules of origin into the existing trading rules. These are teething problems, but they are moving towards a structural problem.”
These are not just disruptions, these are M&S disruptions
Make UK carried out a survey in February showing that 60% of companies had been experiencing significant disruption since the end of the transition period on 1 January. Its research revealed that 61% of businesses were enduring supply chain disruption importing or exporting to and from the EU and 32% were having their supply chains impacted in both directions. Customs paperwork urgently needs to be simplified on both sides of the border, the manufacturers’ organisation insisted, so it can be completed and checked quickly before haulage journeys begin and companies can be reassured that their goods have a clear run to the end customer.
It highlighted that some companies were finding the burden of proving origin so onerous that they were choosing to pay the tariffs rather than spend additional time and money attempting to qualify for tariff-free access. Amongst many companies struggling with the new rules, Marks & Spencer said that it had temporarily stopped selling hundreds of items in its Northern Ireland stores due to “Brexit red tape”.
Easier to land on the moon
With the latest NASA mission to Mars and other space adventures in the news, the British Meat Processors Association (BMPA) commented that it was easier to land an astronaut on the moon than to get a pork chop to Paris. “The new border and customs regime has all but halted small, mixed, just-in-time deliveries of British pork chops, sausages and other meat products to supermarkets and customers in the EU and Northern Ireland,” it complained.
The Association explained that it was no longer viable to send a single lorry load of mixed products from different UK businesses to different EU or Northern Irish customers to stock their shelves for the following few days. BMPA CEO Nick Allen explained: “The new system is adding an average of 30 hours into the process; and the costs to ship these loads are now around 60% higher than last year.”
There was a point last year when it seemed that the entire Brexit negotiations would be brought to a halt because of the UK insistence that it would not give way on fishing rights. When experts pointed out that the fishing industry contributed only a tiny percentage to the UK economy, compared for example to the financial sector which was hardly considered during the talks, David (now Lord) Frost said that the industry was emblematic of the need to take back control.
That may have been the case, but that determination seems to have disappeared in the last few weeks as the fishing industry has united in disbelief at the costs and restrictions that it is now facing. Following reports of seafood rotting on docks before it can be exported to the EU, the Government has promised a £23 million fund to help fishing businesses affected by Brexit delays. This was, however, described as “a sticking plaster at best” by James Withers of the lobby group Scottish Food and Drink. He said that the difficulties were “a very predictable outcome” of trying to test the multi-billion-pound new trading system in real-time in the midst of a pandemic.
Given that they are struggling to sell to their traditional markets in Europe, Cornish fishermen have resorted to rebranding some products that have tended to prove unpopular closer to home. Previously, 95% of megrim fish and 85% of spider crab caught off Cornwall have been exported to Spain. Now it is hoped that British consumers will take more kindly to them if they are marketed as Cornish sole and Cornish king crab.
It is not often that the Association of British Orchestras, Radiohead and the Road Haulage Association (RHA) crop up in article on trade but all have come together in a plea to the Prime Minister. They have highlighted that “unworkable” new cross trade rules, which only allow British-registered trucks three stops in Europe before having to return to the UK, will stop the delivery of European concert tours and other musical performances. RHA chief executive Richard Burnett said: “If the UK events haulage industry is to have any chance of survival, it needs an EU-wide easement so that trucks moving touring equipment can continue to make multiple stops across Europe.” The letter to Boris Johnson highlighted that the events industry, which contributes £70 billion to the economy, relies heavily on long-established specialist hauliers.
These views have been echoed by David Wells, Chief Executive of Logistics UK, in an appeal to Lord David Frost, the new Cabinet Minister with responsibility for the UK’s future relationship with the EU. “The UK has a global reputation for the delivery of tours for the performing arts, conferences and exhibitions, as well as for tv and film production,” he told Lord Frost. In addition to the specialised transport companies operating to support these tours, which represent a combined fleet of 700 to 800 heavy goods vehicles (HGVs), there are 1000 full-time jobs in the supply industries that rely on a vibrant British cultural sector continuing to operate as it does at present.
No to nannies
According to the British Au Pair Agencies Association (BAPAA), au pairing between the UK and EU is under severe threat from Brexit. No special provision was made for nannies and au pairs in the EU-UK trade agreement and au pairs must now earn a minimum of £20,000 per year to obtain a work visa. As the previous arrangements tended to be on the basis of offering free board and lodging to these young people, in return for their help with children, and with most actually being paid no more than £5000 a year, the door has closed on further employment in this sector.
Under the current regulations, the only foreign nationals who can work as au pairs are either Europeans who arrived in the UK before Brexit or nationals from nine counties that include Canada, Australia and Japan under a youth mobility scheme. The pool of candidates from these remaining countries does not come close to filling the annual demand for 45,000 au pairs in the UK, BAPAA said.
Some good news
Despite the fact that its data protection rules largely mirrored the EU’s own General Data Protection Regulation (GDPR), when the transition period ended on 1 January 2021 the UK was no longer recognised by the EU has having “adequacy” in this regard. The European Commission has the power to determine whether a country outside the EU (a third country) offers an adequate level of data protection. During the discussions with the UK leading up to the announcement of an agreement on Christmas Eve, this part of the negotiations remained incomplete as the UK reverted to third country status.
However, the Commission had committed to continue to examine the situation and has now confirmed that it has prepared two adequacy Decisions for transfers of personal data to the UK, one under the GDPR and the other for the Law Enforcement Directive. This second item of legislation has the rather unwieldy title of Directive (EU) 2016/680 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties.
Commissioner Didier Reynders said: “A flow of secure data between the EU and the UK is crucial to maintain close trade ties and cooperate effectively in the fight against crime. Today we launch the process to achieve that.” It is essential, he went on, that the adequacy findings are future-proof, now that the UK will no longer be bound by EU privacy rules. Therefore, once these draft Decisions are adopted, they will be valid for a first period of four years which will be extendable “if the level of protection in the UK continues to be adequate”. Until the new legislation is in place, data flows between the European Economic Area (EEA) and the UK are protected by a conditional regime that expires on 30 June 2021.
These latest moves have been welcomed by the British Chambers of Commerce (BCC) Co-Executive Director, Hannah Essex, who said: “With the free flow of data critical to their operations, businesses will be greatly relieved at the granting of data adequacy which removes a costly cliff edge at a time when many are already struggling due to the pandemic and post-Brexit trading conditions.”