More than three-quarters of firms say the government’s post-Brexit trade deal with the EU has not helped them to expand their business in the last two years despite promises that it was an “oven-ready” deal.
A survey by the British Chambers of Commerce (BCC) has prompted the business lobby group to present the government with five urgent recommendations for enhancing the agreement, which has left many exporters struggling to sell into the EU under the current terms.
More than half (56%) of the BCC members surveyed who trade with the EU said they had experienced problems complying with new rules for exporting goods, while 45% reported issues trading in services. Overall, as many as 77% of firms trading under the deal said it had not helped them to increase sales or expand.
The BCC’s director general, Shevaun Haviland, said: “Businesses feel they are banging their heads against a brick wall as nothing has been done to help them, almost two years after the TCA [trade and cooperation agreement] was first agreed. The longer the current problems go unchecked, the more EU traders go elsewhere, and the more damage is done.”
The group’s members, the majority of which are small and medium-sized businesses, highlighted difficulties administering EU rules on VAT; inconsistent application of customs rules; and new limits on business travel.
On regulation, two-thirds of members said they would prefer to continue using the EU’s CE mark of product quality, instead of switching to the UK’s new post-Brexit equivalent, the UKCA.
The shadow international trade secretary, Nick Thomas-Symonds, said: “This is a damning report and shows the mess the Conservative government have made over trade policy. For over three-quarters of businesses to say that agreements struck by the government are not helping them to grow or increase their sales is unacceptable.”
The TCA was the core of Boris Johnson’s “oven ready” Brexit deal. The then prime minister announced that it had been struck on Christmas Eve two years ago.
It allows UK goods to avoid EU tariffs but imposes additional customs and regulatory checks and other “non-tariff barriers”, as Britain opted to be outside the EU’s customs union and single market.
The TCA is due to be reviewed in 2026, when it will have been in operation for five years, but the BCC is calling on the government to negotiate some changes immediately.
“There are clearly some structural problems built into the TCA which cannot be addressed until it is reviewed in 2026. But as we set out in our report to government there are some issues that do not need to wait on months of negotiations or major reviews to be fixed,” said Haviland.
One key demand is for the government to seek an early resolution to the standoff over the Northern Ireland protocol, to “stabilise” the trading relationship with the EU.
Talks between the two sides on the protocol are continuing, after Rishi Sunak told the US president, Joe Biden, that he would like to see the impasse ended before next year’s 25th anniversary of the Good Friday agreement.
Controversial legislation championed by Liz Truss that would bypass the protocol, which the EU had warned could lead to a trade war, appears to have been shelved for the moment while negotiations take place.
The BCC’s other proposals include seeking an agreement to lift veterinary checks on agrifood exports; and negotiating an opt-out from the rule that forces small exporters to work with a “fiscal representative” based in the EU, in order to levy VAT.
Echoing other trade bodies including manufacturers’ group Make UK, the BCC would also like to see the CE mark continue to apply to goods sold in Britain.
The BCC’s call for action from the government came as research from the Centre for European Reform (CER) thinktank claimed Brexit had shaved 5.5% off GDP, and cost £40bn in tax revenues.
In a new report, the CER’s John Springford compares Britain’s performance since Brexit with a basket of similar economies.
Using this approach, known as the doppelgänger method, he finds that the economy is likely to have been £30bn, or 5.5% smaller in the second quarter of 2022, than it might have been had Brexit not happened. This is at the high end of recent estimates.
Springford argues that the weaker economy has had a knock-on effect on public finances, contributing to Sunak’s decision to increase taxes.
“If the UK economy had grown in line with the doppelgänger, tax revenues would have been around £40bn higher on an annual basis,” he said.
The Conservative peer Gavin Barwell, who was previously Theresa May’s chief of staff during the then prime minister’s fraught Brexit negotiations, urged his colleagues to acknowledge the impact of leaving the EU on the economy.
“Our politicians can’t go on ignoring this economic self-harm for ever. That doesn’t mean we have to rejoin, but it does mean we need to reduce the very damaging barriers to trade that we have introduced with our nearest neighbours,” he said.
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