Are the Tories washing hands of Brexit mess?
Fears of permanent loss of customers flagged by key sectors as business pays the price for Boris Johnson’s hard Brexit, writes Ian Mcconnell
THE head of Seafood Scotland has this week warned that the reputation of the UK, when it comes to fish exports to the European Union, is being lost “day by day” in the wake of Brexit.
The Boris Johnson administration – as people with any understanding of the Brexit reality know – looks very foolish in an international context over the damage it has done so wilfully and unnecessarily to the UK with its hard departure from the EU.
However, it is not Mr Johnson’s
Cabinet which is paying the price for its folly. It is households and businesses.
For exporters and their employees, reputational damage is a much more practical thing. If businesses cannot get their exports to continuing EU member states in time, they will lose customers.
Paul Sheerin, chief executive of industry body Scottish Engineering, warned in The Herald last month that “the biggest concern cited every day [by companies] is that their EU customers finally run out of patience with the delays they are experiencing in buying from the UK and look around for alternatives without the barriers we have chosen to initiate”.
Seafood Scotland chief executive Donna Fordyce’s latest warnings, on Tuesday, also highlight this huge danger of the incredible Tory Brexit fiasco: the permanent loss of markets for exporters. Both Mr Sheerin and Ms Fordyce highlight, in practical, irrefutable terms, the major, intractable problems being encountered, by even the best-prepared businesses.
Mr Sheerin wrote in Scottish Engineering’s latest quarterly report published last Friday: “Even the bestprepared companies with solid export and import experience have contacted us to seek direction [and] advice on complex areas of VAT, duty suspension, conformity assessment, country of origin rules and essential travel to support customers.”
And he observed: “Some of these rules were only clarified on completion of the UK-EU trade agreement, less than 10 days before the end of transition period, and frankly the online guidance tools are not enough to help.”
Mr Sheerin’s comments, and those of Ms Fordyce, shine a light on the grim everyday realities for companies across a raft of sectors of a dismal Tory Brexit fuelled by ideology.
Not just a Brexit but a hard Brexit, with the Tories utterly hell-bent in the wake of the 2016 exit vote on ensuring departure from the single market and customs union, no matter what. This attitude ensured the Brexit forced through by the Tories would hit the economy, businesses and households hard, with the loss of the huge benefits of free movement of people and of frictionless trade.
What has become excruciatingly evident since the end of the transition period is the difference between tarifffree and truly frictionless trade. It is difficult to know whether this difference, obvious to so many, had escaped Mr Johnson, Minister for the Cabinet Office Michael Gove et al, or whether they knew fine well and were willing for others to pay the price so they could have their ideological Brexit.
People should be accountable for their own actions. So, of course, it is entirely unfair that exporters should have to foot the bill for the poor choices of the UK’S leaders. However, that is exactly what is happening.
Ms Fordyce told the House of Commons’ Environment, Food and Rural Affairs Committee: “We were so integrated within the supply chains within Europe – to try and unpick that ... The impact, even though companies were prepared as much as they can be ... it’s just too many systems, too many things … up against time. You’re buying fish on the market that morning, processing it, collecting it at lunchtime, getting it away down to the hubs or direct to the marketplace for next morning. The new system just doesn’t allow that and we cannot guarantee day one for day two, which we did before, so the reputational risk of the UK is getting lost day by day and we need to rebuild that.”
Ms Fordyce also explained some firms are now facing an additional annual cost of between £250,000 and £500,000 for paperwork alone so they can sell their fish to the EU market.
It is a strikingly similar story of huge logistical challenges to that told by Mr Sheerin, albeit from the perspective of a very different sector.
By now, it should go without saying that these protracted major difficulties are not mere teething problems. They are the result of arrangements which have been changed permanently, and very much for the worse. And there is the potential for even more chaos when grace periods relating to aspects of the new trade arrangements end.
As Mr Sheerin has highlighted, the big fear of exporters right now is that longstanding customers who can suddenly no longer rely on timely delivery of their orders will buy from elsewhere, specifically from businesses within the EU. We know well in the UK how easy it is to trade without barriers as part of the EU bloc because the country was a member of the single market until Tory Brexiters chose to throw this hugely valuable privilege away a little more than two months ago.
Ms Fordyce said: “The total time we had before was 22 hours to get to market. At the moment the best case is 28, and the worst case is 39 hours.
“That reputational risk with the customers – they are finding other supply chains. There is other countries waiting to take up these contracts. There is the Norwegians, who are all over the salmon … This will be long-term losses – how do we regain these markets, how do we regain the trust, how do we regain that consistency, how do we regain the price that we are actually receiving for the product?”
This is the nub of the issue. The clock is ticking. The problems are continuing. And the Johnson Government seems entirely unperturbed. More than that, the Johnson Cabinet, packed with Brexiters, seems rather pleased with itself.
Of course, members of the Johnson Cabinet have not only got their beloved Brexit done but they have implemented a huge clampdown on immigration from EU countries, an utterly lamentable move celebrated very loudly by Home Secretary Priti Patel when legislation was passed late last year. It appears Mr Johnson and his Government are either out of touch with the reality of what is facing companies, or it is not a priority for them. It is difficult to see any other explanation for their poor choices.
Mr Johnson, when asked in late January during a visit to Scotland about the troubles facing the fishing sector, said: “Of course there are teething problems in lots of areas and that’s inevitable because this is a big change.”
Martyn Youell, senior manager of fisheries and quota at fishing firm Waterdance, told MPS on the Environment, Food and Rural Affairs Committee that the description of the issues facing the industry as “teething problems” was a “particularly poor choice of words”.
He is not wrong.
Mr Gove was eventually forced to concede, in early February, that border disruption in the wake of the end of the transition period amounted to more than teething problems. This is something that was evident to the non-ideologically driven from the outset, with the woes inevitable long before the transition period ended.
One of the things not mentioned by Chancellor Rishi Sunak in his Budget speech on Wednesday was the Office for Budget Responsibility’s expectation that “temporary near-term disruption to EU-UK goods trade” would reduce UK gross domestic product by 0.5 per cent in the first quarter of this year. That is a very significant impact over such a short timeframe.
The services sector, which is not covered by Mr Johnson’s narrow free trade agreement with the EU, is for its part continuing to face the very significant consequences of Brexit.
UK financial services sector assets and jobs continue to be moved by firms to EU countries. The pace of shift has slowed, but this is because so much had to be done ahead of the end of the transition period. The movement is crucially forecast to continue, and the effect of lost jobs will be permanent.
It did not take Amsterdam long, after the transition period ended, to overtake London as Europe’s largest share trading centre.
More than one-quarter of UK financial services firms have said publicly Brexit is having a negative impact on their business, or will do so.
The ongoing fallout for this key sector from the UK’S departure from the EU is revealed in the latest EY financial services Brexit tracker published this week.
EY highlighted the fact that 43% – 95 out of 222 – financial services firms have stated publicly that they have moved or plan to shift some UK operations and/or staff out of the country to elsewhere in Europe. The accountancy firm said the total number of associated job relocations since the EU referendum had risen to nearly 7,600, from 7,500 in October 2020.
Fifty-seven out of 222 UK financial services firms, 26%, have stated publicly that Brexit is negatively impacting their business or will do so. This is up from 49 firms in January 2020, EY noted.
EY cited the likelihood of “slower yet ongoing movement of people and assets” from the UK to elsewhere in Europe for compliance purposes, following “significant swathes of asset and job relocation announcements”.
With Brexit, from a UK perspective, it is all one-way traffic. Forget the big talk and promises from the Johnson administration – the reality is that Brexit has brought only negatives. Situations such as Ms Patel finding a positive in the detrimental clampdown on immigration do not count.
The economic damage will only grow from here – with the Theresa May government’s forecasts having shown the huge economic damage of leaving the European single market under any scenario.
The whole sorry mess, including the short-term chaos, is the fault of the Johnson administration. Members of the Cabinet seem happy, but it is not them who are paying the price. Ask the exporters right now – whether they are engaged in engineering, the seafood business or the many other sectors affected – who they think is footing the bill for Brexit.
And whether this is fair.