Last reviewed 6 April 2021
In our regular look at the developing situation between the UK and the EU post-Brexit it would be safe to say that the fourth movement of Beethoven’s Ninth Symphony, the anthem of the European Union, will not have been playing regularly on either side of the Channel in the last month as relations between the UK and the EU have been anything but joyful.
The month began with the UK deciding to extend the grace periods relating to goods entering Northern Ireland from the UK. This is allowed under the Northern Ireland Protocol but is supposed to require the agreement of both sides: the UK acted without consultation.
Lord Frost said that these changes were “temporary technical steps”, which largely continued measures already in place, to provide more time for supermarkets and parcel operators to adapt to and implement the Protocol’s new requirements. The measures were “entirely consistent with our intention to discharge our obligations under the Protocol in good faith”, he went on.
The European Commission effectively replied “see you in court” by way of a letter opening an infringement process against the UK. “It is the second time in the space of six months that the UK government is set to breach international law,” the Commission pointed out. The case could end up in the Court of Justice (CJEU) which will be interesting as that particular European institution is anathema to Brexit-supporting MPs and most UK newspapers.
Getting the needle
The EU failed to spend too much time on the moral high ground, however, as the rest of March saw it first rejecting then demanding the AstraZeneca vaccine while also warning the firm that it would ban exports from its plants in Belgium and the Netherlands if it failed to meet its commitments to providing supplies of the vaccine to the EU. Internal Market Commissioner Thierry Breton said that, if the company failed to deliver on its commitments, “the doses stay in Europe” (in which he presumably does not include the UK). Health Secretary Matt Hancock said that the EU has no claim to doses of the vaccine contracted to the UK because “London’s contract is exclusive while Brussels only managed to obtain a best efforts deal”.
And the good news is…
With vaccine wars taking up much of the media’s attention, the only good news for Prime Minister Boris Johnson was that it left little time to consider the statistical reports marking the first months of Brexit. As none of them were particularly reassuring, this lack of publicity probably did not cause him to lose too much sleep. Only so far available for January 2021, the figures show the largest fall in exports to the EU since records began 20 years ago. Released by the Office for National Statistics (ONS), the figures show that the drop on UK exports of goods, down by £5.3 billion (19.3%), was entirely caused by a £5.6 billion (40.7%) fall in exports to the EU. Falling imports of goods in the month under review were driven by a £6.6 billion (28.8%) drop in imports from the EU.
“External evidence suggests some of the slower trade for goods in early January could be attributable to disruption caused by the end of the transition period,” the ONS said with masterly understatement. The Head of Economics at the British Chambers of Commerce, Suren Thiru, suggested that the slump in UK exports of goods to the EU, particularly compared to non-EU trade, provided “an ominous indication” of the damage being done to post-Brexit trade by the current border disruption. “The practical difficulties faced by businesses on the ground go well beyond just teething problems and with disruption to UK-EU trade flows persisting, trade is likely to be a drag on
UK economic growth in the first quarter of 2021,” he predicted. Rather more succinctly, the senior policy adviser to the Institute of Directors said that the figures were “horrendous”.
Gove takes on the hauliers
Perhaps not surprisingly, given the above figures, the Road Haulage Association (RHA) reported that exports going through British ports to the EU fell by 68% in January 2021 compared with January last year. Chief Executive Richard Burnett also reported that up to 75% of vehicles that had come from the EU were returning empty. Both assertions were dismissed by Cabinet Minister Michael Gove who said that flows are monitored on a daily basis by the Border Operations Centre, and, in the week 30 January to 5 February, both outbound and inbound flows (across all UK ports) were close to normal, at 95% outbound and 96% inbound.
Mr Gove also disputed the argument with regard to empty vehicles. He said: “It is an entirely normal part of freight flows to have empty lorries on the outbound leg from the UK into the EU - this has always been the case. Indeed, estimates suggest that, prior to 1 January, around 30% of all outbound lorries were empty.” Finally he dismissed assertions from the RHA that, whereas as many as 50,000 customs brokers are required to deal with post-Brexit paperwork, there are so far only about 10,000 in place.
Taking back control?
Mr Gove is unlikely to have welcomed the decision of the Food and Drink Federation (FDF) to produce a “Food and Drink Trade snapshot”, based on the ONS data for January, showing that food and drink exports to the Union fell from £1 billion in January 2020 to £256.4 million a year later. This fall of 75.5% contrasts with an 11.1% decline in exports to the rest of the world. In January 2020, Ireland was the UK’s biggest market, representing around 18% of total food and drink exported. By January 2021 this figure was down to just 5%.
FDF Head of International Trade, Dominic Goudie, said: “Businesses face significant challenges when trading with the EU and small firms in particular have been shut out because groupage distribution is not working. In the absence of solutions, EU exporters will face much the same difficulties when the UK’s full border operating model enters into force in 2022.” It is clear, he continued, that the terms of the Trade and Cooperation Agreement (TCA) will not be amended and businesses face unavoidable changes to the terms of trade.
In the face of figures showing losses of this magnitude, smaller businesses will have welcomed the news that they can now apply for grants of up to £2000 to help them adapt to new customs and tax rules when trading with the EU. HMRC has announced that the £20 million SME Brexit Support Fund is now open and will enable traders to access practical support, including training for new customs, rules of origin and VAT processes. To be eligible, firms must import or export goods between Great Britain and the EU, or move goods between Great Britain and Northern Ireland.
Katherine Green and Sophie Dean, Directors General of Borders and Trade and HMRC, respectively, said: “We recognise that changes to customs rules have been challenging for small and micro businesses, and this is why we are encouraging business owners to apply for support through the SME Brexit Support Fund.” More information about the Fund, including details of how to apply, can be found at https://www.gov.uk/guidance/grants-to-help-small-and-medium-sized-businesses-new-to-importing-or-exporting.
Yes, we have some bananas
The Central African country of Cameroon is the latest addition to the range of partners with which the UK has signed trade agreements since it left the European Union. The Economic Partnership Agreement (EPA) cements a trade deal which will, the Department for International Trade said, support jobs and build future prosperity. UK-Cameroon trade was worth around £200 million in 2019, and this deal lays a foundation to extend this trading relationship in the future. The UK market accounts for 12% of total exports of bananas from Cameroon and this tariff-free market access will be maintained. The EPA also guarantees continued market access for UK exporters, who sold £50 million in goods to Cameroon in 2019.
The UK Government has now secured agreements covering 66 countries. However, as a number of trade analysts have pointed out, this covers just 80% of the UK’s trade. Which means that the UK is actually in a weaker position in terms of its non–EU trade than it was in 2016 before the Brexit referendum.
Taking back control – part 2
More bad news for Brexit supporters as a research body looking into the changing relationship between the UK and the EU has highlighted a number of constraints and pressures that are likely to limit the space for regulatory divergence. UK in a Changing Europe has highlighted the extent to which businesses are invested in existing regulatory systems, based on the UK’s 40-year membership of the Union.
The report examines trade in goods, data protection, road haulage, aviation and food safety and sets the domestic legislation covering each against the changes made or allowed by the TCA. Its report concludes: “If the aim of Brexit was to ‘de-Europeanise’ UK regulation, the findings show that that ambition has only been partly realised. Indeed, the analyses suggest that it may not materialise, even over the longer term, due either to the terms of the TCA, constraints arising from non-EU international law and conventions, or other pressures militating against policy change.”