“There was this time when they had problems with us sending elderberries – the most benign of foods. Because of which, they stopped the whole consignment for over a month!”
Inside an anonymous-looking industrial unit on the outskirts of Reading, where a warm fragrance of tea and spices fills the air, Vishaka Chhetri Agarwal and her husband, Neeraj, are venting their frustrations at doing business with the EU after Brexit. After all, the then prime minister insisted there would be no additional red tape.
Yet, just like the traders in Northern Ireland whom Boris Johnson told to chuck any customs forms they were required to complete in the bin, the Agarwals have found the reality to be rather different.
Both born in Darjeeling, India, they have lived in the UK for 17 years, since Neeraj took his MBA at Cambridge. Their business – Tea People – is a social enterprise, with 50% of the profits going to support schools in tea-growing regions.
“We import tea and ingredients from all around the world. Some of it we repackage, but a lot of it we create our own blends and our own mixes,” explains Neeraj.
Since Brexit, new customs checks and complying with EU VAT rules have created endless headaches. “It’s definitely increased paperwork, stress, everything,” says Vishaka, a microbiologist by background, who creates their blends.
Before Brexit, they were able to send a batch of tea to the packing company they work with in Spain and receive it back, neatly parcelled into little paper envelopes, within three weeks. Now, Neeraj says, the tea hasn’t completed the first leg of its journey in that time.
“When we send a consignment over to them, almost every single one is held by customs and they always ask for extra documentation. Next time, we send all of those same documents, the same commodities – but they still come back asking for more.”
They had built up a loyal market in several EU countries, including Germany and France, selling both directly to customers from their website, and via Amazon. But they have opted to stop doing so for the time being after customers complained about lengthy delays – and then were sometimes double-charged VAT when their tea finally arrived.
Two years after Boris Johnson signed the Brexit trade and cooperation agreement (TCA), William Bain, the head of trade policy at the British Chambers of Commerce, says experiences like these have been replicated across thousands of businesses.
In a recent BCC survey of more than 1,100 businesses marking two years since the TCA was signed, 77% of firms trading with the EU said the deal was not helping them to increase sales or grow their business. More than half (56%) reported difficulties adapting to the new rules for exporting goods, and 45% said the same for services.
“These are structural barriers,” says Bain. “You can distinguish this from the period in 2021 when we had a bit of extra queueing at Dover or Calais. That’s about how customs officials are applying the rules; but we’ve reached a reasonably stable position around that, and the structural problem is the operation of some of these rules and the paperwork requirements, and those have not improved at all.”
He cites in particular the border checks faced by food exporters; and issues with administering VAT. In theory, small exporters can use the EU’s online import one-stop shop (IOSS), to help smooth the charging of VAT, but it requires them to work with a “fiscal representative” based in the EU, adding to costs – and some businesses the Guardian spoke to said it was still hit or miss.
Lizzie Heyes’s London-based jewellery business, Secret Halo, was exporting to customers across Europe before Brexit via her website, but is now only selling through marketplaces such as Etsy and Amazon, which take a cut of each transaction.
“It’s too costly for someone like myself to pay for the services of an intermediary in the EU. So that’s why I’ve turned to marketplaces to navigate those costs and the red tape for me,” she says.
Even with an online marketplace to navigate the IOSS system, there are still problems, however. “EU customers have lost faith. I’ve had so many where I have made the sales through marketplaces, where they’ve been charged twice – so, disgruntled customers.”
The BCC is urging the government to try to negotiate for the requirement for an EU-based fiscal representative to be lifted – something Bain says could be done through the EU-UK “specialised committees” that oversee the operation of the TCA.
In the medium term, it is calling for a veterinary agreement with the EU, to alleviate some of the checks to which agrifood exporters are subject; and in common with other trade bodies, including the manufacturers’ group Make UK, it would like to see UK businesses continue to be able to use the European CE mark for product standards. The UK has set up its own alternative – the UKCA – but businesses wanting to export to the EU must also comply with the CE system and are reluctant to submit to two sets of regulatory checks.
Many larger companies have been able to cope better with the additional requirements of selling into the EU market – and bear the costs of doing so more easily. Make UK recently found that only a third of member companies are still struggling to comply.
But economists say the broader picture of the UK’s performance in international trade since Brexit is one of becoming a little less open to the world.
The independent Office for Budget Responsibility (OBR) estimates that, over the medium term, Brexit is likely to reduce the “trade intensity” of the UK economy – effectively the share of trade in GDP – by 15%.
“The latest evidence suggests that Brexit has had a significant adverse impact on UK trade, via reducing both overall trade volumes and the number of trading relationships between UK and EU firms,” the OBR said in its latest economic and fiscal outlook, published alongside last month’s budget.
While exports to the EU declined sharply at around the time of the end of the Brexit transition period, they have since more than recovered.
But John Springford, of the Centre for European Reform, says it’s important to track the UK’s performance against other, similar economies – an approach he calls the “doppelganger method”.
“If you compare UK trade after leaving the single market to UK trade before, then you’re not really comparing apples with apples, because you need to compare with other countries. There’s been a big global goods trade boom since the end of the pandemic,” he says.
Springford’s latest estimates using this approach suggested the UK’s total trade in goods – imports plus exports – was 7%, or £15bn, lower in the second quarter of 2022 than it would have been if it had tracked comparable economies. On services, he finds little difference.
Stephen Hunsaker, of the thinktank UK in a Changing Europe, says a shift is clearly visible from when the trade deal was signed on 31 December 2020.
“It is clear that the thing that impacted trade openness the most was the ending of the Brexit transition period. That’s one of the signs that really tell the story – we can narrow this down and say with confidence, Brexit has affected this,” he says.
“It’s been difficult, and we’ve heard that from businesses of all shapes and sizes,” says Marco Forgione, the director general of the Institute of Export and International Trade, a membership body that delivers government-funded training to businesses.
He detects a tacit acknowledgment of these challenges from the Rishi Sunak government, after the combativeness of the Boris Johnson era, and Liz Truss’s brief, boosterish premiership.
“In the conversations with ministers and officials, there seems to be a much more pragmatic approach to building a constructive relationship with the EU,” he says.
Sunak recently told the US president, Joe Biden, that he would like to see the standoff over the Northern Ireland protocol resolved by the time of the 25th anniversary of the Good Friday agreement next April, and has shelved the highly controversial Northern Ireland bill while talks take place.
Forgione argues that exporters can and will continue to adapt to the new trading environment. “I think there are huge opportunities, and there is potential,” he says, insisting many of his members are positive about the future.
A government spokesperson points to the benefits of trading outside the EU: “The trade deals we’re negotiating will open exciting opportunities that reflect the changing nature of global trade. Europe’s share of global GDP will fall from 19.9% to 14.1% by 2050, while our deals with India, Australia and the trans-Pacific CPTPP will latch our economy to some of the fastest growing markets across Asia and the Indo-Pacific.”
Yet former the agriculture secretary George Eustice recently criticised the Australia deal for making too many concessions; and the OBR has suggested these agreements “will not have a material impact, and any effect will be gradual”.
Major changes to the EU deal appear highly unlikely, meanwhile. The TCA will be subject to a five-year review by 2026 – after the next general election; but Labour has made clear that should it win a majority it has no intention of unpicking it.
“We will make Brexit work. We don’t believe it is in the national interest to reopen this debate, with all the division, all the issues that that would subsequently cause,” says the shadow international trade secretary, Nick Thomas-Symonds. “We have set out our red lines, and there are three of them: no return to the single market, no return to the customs union and no return to freedom of movement.”
Instead, Labour is promising to try to negotiate piecemeal reforms, including a veterinary agreement of the kind the BCC would like to see, and mutual recognition of professional standards.
Any tweaks won when the TCA is eventually reviewed will come too late for the jewellery-maker Heyes and her fellow small business-owners, however, many of whom she says have stopped selling to the EU, or ceased trading altogether.
“It’s all everyone talks about on the Facebook groups,” she says. “It’s just moaning about Brexit all the time, and how it’s killed their businesses.”
