Post-Brexit U.K. learns independence comes with a mountain of paperwork
LON D ON» As the new year made Brexit a reality, Tony Hale encountered the pitfalls of Europe’s redrawn geography. Specifically, he confronted the need to extricate 53 tons of rotting pork products from administrative purgatory at a port in the Netherlands.
For more than two decades, Hale’s company had shipped pork to the European Union without customs checks, as if the United Kingdom and the continent across the water were one vast country. With Britain now legally outside the bloc, exporters suddenly had to navigate inspections, safety regulations, and a bewildering crush of paperwork.
For Hale, incorrectly prepared documents meant sending five containers full of pork to an unplanned final destination — the incinerator.
“It’s a new game, and we have got to learn the rules,” Hale said. “We are having to double- and triple-check every document.”
In the early days of the postBrexit era, Britain is struggling to adapt to its new position in the global economy — its fortunes still tethered to the European Union; its companies on the outside. The trade deal Britain struck late last year with the European Union stopped tariffs from being imposed on goods exchanged across the English Channel, but did not prevent the revival of customs procedures, health and safety checks, valueadded taxes on imports, and other time-consuming, commercelimiting hindrances.
Paperwork snafus, customs horrors and other expensive disruptions are intensifying the strains on an economy that was already reeling from the pandemic.
On Friday, the Office of National Statistics announced that Britain’s economy contracted by nearly 10% last year, the worst plunge in centuries. Economists have anticipated a robust expansion later this year, as Britain’s vaccination campaign — among the world leaders — yields a return to normalcy, but Brexit-related mishaps are likely to limit the upside.
Prime Minister Boris Johnson, a Brexit champion, has portrayed Britain’s independence from Europe as a strength in allowing the government to move quickly on its vaccination drive. Administration officials have minimized Brexit troubles, describing them as “teething problems” that will subside once businesses master the intricacies of the new procedures.
But many companies — especially small- and medium-sized firms — lament what feels like a new normal.
The European Union has traditionally purchased nearly half of Britain’s exports. The volume of exports crossing the channel in January collapsed by more than two-thirds compared to the previous year. Some producers of fish, shellfish, meat and dairy have been cut off from markets in Europe, suffering a catastrophic plunge in sales.
Transport firms are so wary of the complexities of sending goods from Britain to Europe that many are avoiding the business. Roughly half of all trucks bringing goods from the French port of Calais to the English port of Dover are now returning empty, transporting nothing but thin air.
Britain’s lucrative finance industry has seen trading in the stocks of European companies shift abruptly to the continent, as Amsterdam has displaced London as the primary market for such shares.
Manufacturers are contending with grave disruptions to their supplies of finished products, components and basic materials.
And the changes imposed by Brexit are only beginning, as London and Brussels continue to renegotiate the rules governing future commercial dealings across the channel.
“We are going to be living with Brexit for the rest of our lives,” said Jeremy Thomson-Cook, London-based chief economist at Equals Money, an international money manager.
During the 2016 Brexit referendum campaign, those in favor of leaving Europe promised businesses liberation from the suffocating regulations and time-sucking bureaucracy that supposedly prevailed across the Channel. Even those who can reach European markets have discovered that the promised bonfire of regulations is actually a burning hell of paperwork.
In the southwest of England, a few miles from the village that gave its name to cheddar cheese, one cheesemaker, Lye Cross, anticipates spending an extra 125,000 pounds ($173,000) a year to comply with the administrative requirements that have accompanied Brexit. A transaction that last year entailed seven steps, including paying and invoicing, now runs to 39, said Ben Hutchins, the company’s sales and marketing director.
Before Brexit, Fashion Enter, an e-commerce business with a pair of factories in Britain, could place an order for high-quality thread made in Germany and receive it in perhaps five days.
A recent order took more than three weeks. It also incurred a handling charge of 44 pounds (more than $60) to cover the preparation of customs paperwork. Without the thread, the company had to postpone work on a crucial order — 10,000 protective gowns for front-line medical workers at the National Health Service.
The thread supplier now imposes a minimum of 135 pounds ($185) on orders from Britain, cognizant that a lower amount would require it to register to pay British value-added taxes, said Jenny Holloway, Fashion Enter’s chief executive officer.
The new minimum order has forced the company to stock up more. “It’s going to tie up our cash,” Holloway said. “This is the new business that we find ourselves in.”