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Monday, January 18, 2021

Teething problems or a more serious crisis?

We are two and a half weeks into post-Brexit Britain and already businesses are starting to feel the impact of the new regime, but it is not a pleasant experience for most of them.

Yesterday's Observer reports that despite government ministers Government ministers describing the post-Brexit headaches that British exporters have suffered since 1 January as mere “teething problems” the real story is entirely different. They say the supposed golden era of global Britain is causing British entrepreneurs, large and small, very serious problems:

UK fish exporters are unable to sell into European markets because of delays at borders and complain that Boris Johnson and others misled them about Brexit. Leading supermarket chains are warning ministers of food shortages in Northern Ireland because of new border rules and bureaucracy. And small UK companies such as Paul’s, which thrived as part of the EU single market, are saying they may have no future at all in exporting into continental Europe because of the crippling new costs.

Paul is a director of Leon Paul, based in Hendon, north London, which employs 50 people. It is a niche business, which has been in his family since it was set up in 1921. It designs and manufactures equipment for the Olympic sport of sword fencing. But in many ways it is typical of tens of thousands of small companies that sold some of their goods at home and some abroad, and enjoyed seamless access to the border-free EU market for decades. “Previously the business of sending orders direct to customers in Europe was very straightforward,” he says.

“You put something in a box, sent it off with a courier and it got to the customer in a day or two days without any friction, just like sending something within this country.”

Almost a third of Leon Paul’s £7m annual turnover is to customers in EU countries. On average each order to the EU has been worth about £200. But the European export side of the business is now looking increasingly unsustainable.

“We did everything we could to prepare for Brexit and are part of the DTI’s export champion community,” says Paul. But since 1 January, his firm – like other UK exporters – has been hit by three new charges. And four days ago the firm discovered another one that his customers in the EU will have to pay on receiving the goods.

“As far as I can see, currently, companies like ours in the UK are not going to be able to do ‘end sales’ to customers in the EU any more. Particularly, small orders for anything under £100 will be completely impossible,” says Paul.

The new export levies, which he says will amount to £160,000 a year for Leon Paul, are first, a “Brexit charge”, as the couriers are calling it, an export fee of £4.50 for every parcel shipped to the EU to cover costs of extra administration and form filling that couriers must carry out.

Second, there is a “deferment account fee” of £5 per parcel that covers couriers’ costs of pre-paying import charges in the destination country; and third, a “disbursement charge” which is set at different levels in each EU country with a minimum of about €14 per parcel, or calculated as a percentage of the value of the goods, whichever is the higher, plus VAT in the destination country. This covers the costs of the tax authority in the recipient country inspecting and processing the parcels.

For the past fortnight Paul has been trying to work out how to absorb the extra costs. But he is struggling to see an easy way.

“Jobs lost will be lost here,” he says. “That is the reality. All of these fees will come straight off profit margins.

“We might save some of the increased costs of doing business in Europe by setting up a warehouse there – and thereby avoid paying charges on every consignment – but we would have to make redundancies in our warehouse here and reduce the size of the business footprint in the UK. We are of course a relatively small business but all exporters will be hit with similar charges.”

The paper points out that it is only Covid-19 that is preventing stories like this dominating the news. They add that privately ministers know things will get worse, while civil servants in Whitehall are letting it be known that there is little that can be done because the exhaustively negotiated trade deal is largely set in stone. The brave new world is not working out as the Brexiteers predicted.
It suits Johnson to have the virus consuming ALL media coverage (remember that in one way or another it is right wing. Papers controlled by non doms.Appointments to beeb etc Johnson ,Tory supporters) It drowns out Brexit problems.
Brexit problems are beginning to appear, paperwork,fishing exports(how much coverage of this) to start with.He offers 200 million for these 'teething problems'.Does that mean NO loss of jobs as Brexit bites? I doubt it.
Put "GB olympic fencer Paul" into a search engine and you see what a great contribution the Paul family has made to British sport over the years. It would be a tragedy to lose successful specialist firms like theirs.

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