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Yes, a third of UK exporters to the EU really have given up over Brexit

Red tape continues to frustrate small businesses as the hunt for the sunlit uplands goes on

A London taxi driver waves a Union Jack flag in Westminster after the Brexit vote. Photo: PA.

Last week, as the country was still focused on the death of the Queen, news reporting seemed to stand still. But news remained, it just slipped out unnoticed.

This will have been a boon for Brexiteers, because Project Fear is the gift that keeps on giving. The latest prediction the “doomsters” got right about a hard Brexit was that it would harm UK trade. And in the midst of the mourning period, a slew of reports appeared, pointing out that 33% of British exporters had given up the ghost and stopped exporting to the European Union – yet another consequence of the bombastic and thoughtless way the rupture with the EU was done.

According to HMRC data, the number of UK businesses exporting goods to the EU fell to 18,357 in 2021 – the first year after the Brexit transition period ended – from 27,321 in 2020.

The main reason is red tape, Michelle Dale, senior manager at accountancy firm UHY Hacker Young, told me. “Basically, pre Brexit, goods used to move freely between the UK and the EU. That’s obviously stopped. Now there are export barriers and import barriers, exporter declarations, importer formalities, import VAT, which is reclaimable but needs to be applied for. It’s all had a massive impact on these companies’ sales. There has been a significant drop.”

The figures are not to be confused with the value of exports, which also suffered but has its own trajectory – for instance, the UK’s export figures for this year will include the positive effect of trade with Ukraine to replace weapons and other goods related to Russia’s invasion.

What Dale is describing is the growing number of UK companies’ reluctance or inability to export – something that was a feature of pre-EU times. A former head of the British Fashion Council told me that, try as they might, they struggled to persuade brands to export in the years before the UK joined the European Economic Community in 1973 because they felt the paperwork and bureaucracy made it not worth the bother. This changed after accession, when Europe effectively became a “home” market for the UK. Now it is another world away.

As Adam Posen and Lucas Rengifo-Keller put it in, The Economics of Brexit: What Have We Learned?, a new e-book, produced by VoxEU/Centre for Economic Policy Research and UK in a Changing Europe, “Brexit means that the UK has declared a trade war on itself”.

Today, there may be no tariffs on goods moving between the UK and the EU, but the problem is about “non-tariff barriers”. The extra bureaucracy — which also causes expensive delays in deliveries as goods and paperwork are checked — is too much for many small businesses, which do not have the staff to do the extra work. These smaller businesses also struggle to afford the advice that might have helped them streamline the process or find workarounds to make things easier, such as registering their business in the Netherlands, although that can also be complex and expensive.

For customers in the EU, the change is sometimes just too onerous. “They don’t want the hassle,” Dale said. “They’re looking for alternative suppliers in the EU. We have clients who are nowhere near back to where they were before Brexit.”

Adding to the misery of EU exports was the acknowledgement by Liz Truss that a trade deal with the United States was years away. That will be a blow to the Sunlit Uplanders, including Lord Digby Jones and the Express, who have long maintained it was all but signed and sealed, although no surprise to “gloomsters”.

“This is quite an admission from Truss. Trying to manage expectations. So-called ‘global Britain’ is going backwards in terms of trade. No immediate deal with the USA, and more barriers erected with the closest market in the EU,” said Stephen Farry, deputy leader of the Alliance Party in Northern Ireland.

In some ways, it is just as well, since a US trade deal would inevitably involve concessions on safety and animal welfare standards, perhaps also on the NHS, under any prime minister. Past experience suggests that Truss, who has presented selling out British farmers for an Australian trade deal as a triumph, isn’t someone who would be squeamish in the face of US demands if it meant she could brag about the deal afterwards.

The figures showing the fall in exporter numbers was blamed by HMRC on changes to the way it collects data and disputed the analysis. “Comparing year-on-year data can lead to misinterpretation and factual inaccuracies, which we believe is the case here,” ,” an HMRC spokesman told CityAM, according to an article published last week.. “In this case not only has our caution been disregarded, but the analysis only takes into account a very small subsection of overarching trade data.”

The data collection change might have some bearing, but government offices have also made a habit of parlaying away bad Brexit news, of which there has been a great deal. It’s not just a matter of Remainer spin, back in April, the then chancellor, Rishi Sunak, acknowledged that Britain’s poor performance in trade compared with its G7 rivals “might well be” due to Brexit. “It was always inevitable, if you change the exact nature of your trading relationship with the EU, that was always going to have an impact on trade flows,” he told the House of Commons Treasury select committee.

The effect of Covid is also there, but the headline issue is Brexit and the seismic change that it has brought to the lives of exporters. And they are not getting enough support from the government to navigate this new landscape.

The drumbeat of bad exporter news is growing. In July, the British Chambers of Commerce (BCC) found in a survey of 2,600 exporters that a quarter had suffered a drop in exports, while less than a third saw sales increase in the second quarter of the year – in the first three months, that had been 40%. The BCC pointed out that while UK exports to the EU and the rest of the world had stalled, many other top exporting countries had boomed. 

Eurostat figures showed imports to the EU from the UK falling from €169 billion in 2020 to €146 billion in 2021 – a drop of 13.6%.  This is a 25% drop if you compare 2021 to 2019, the year before Covid hit Europe. Overall UK exports have stalled too, whereas last year French exports grew by 9.2% and Germany, 9.9%.

According to Santander’s UK trade barometer research, 20% of companies surveyed said their exports were still in decline after Brexit, while only a quarter saw a growth in overseas sales. So much for the great leap forward of Global Britain reaching all parts of the world instead of just pesky Europeans. And nearly two years after Brexit took effect, the EU remains the UK’s biggest trading partner, even with these diminished numbers.

It’s going to be tough to increase trade – even the historically low exchange rate for the pound isn’t helping much so far. Contrary to the beliefs that Liz Truss and her partners in crime — including chancellor Kwasi Kwarteng – set out in their mad, libertarian pamphlet called Britannia Unchained, this is not because British business people are simply “lazy”. Even if they do stir themselves to try harder, the barriers to exporting remain, with problems in recruitment, retention of staff and rising transport costs making things worse.

In response to the steadily falling number of exporters, the Institute of Export and International Trade launched a voucher scheme for companies wanting to start or improve exporting.

It’s become a sorry state of affairs, and such news contributes to the shifting public perception of Brexit. As Peter Kellner’s exclusive poll for The New European has found, 60% of voters, including 46% of Leave voters and 41% of those who voted Conservative in 2019, believe that Boris Johnson failed to “get Brexit done”. Buyer’s remorse is on the increase and Brexit is acknowledged to be going badly.

None of this matters to the hardline Brexiters in government, who have been doubling down on their suspect project, determined to ignore every ounce of reality thrown their way. What else could they do, when the career peak they have now reached is entirely built on the shifting, shifty sands of Brexit?

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