Since 1 January 2021, UK industries have been hit with non-tariff barriers at the UK-EU border. The government has brushed these off as ‘teething issues’ but the red tape is here to stay. Although companies and customers may absorb the additional costs, it is an unambiguously bad outcome for small businesses, who are less resilient to trade disruption.
Leicestershire and Rutland European Movement has conducted research into the impacts of Brexit in the local area. The findings reveal some hard truths about the future for small businesses in the region.
The manufacturing industry is heavily dependent on single market access, which enables goods to flow freely across the border. Losing this access means that significant red tape has been imposed with no observable gain for these added administrative costs. Employment in the East Midlands is disproportionately reliant on the manufacturing industry, so the region is expected to be hit by these Brexit impacts more severely than other parts of the country.
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One furniture manufacturer reported a huge rise in administrative costs. New non-tariff barriers include customs declarations, clearance costs, the need to comply with different VAT rates across the EU. There are also tariff barriers on parts produced outside of the EU which do not meet the ‘rules-of-origin’ threshold. The barrage of red tape on deliveries to the EU has resulted in delivery delays, higher costs for the company and increased prices for consumers. As a direct consequence of Brexit, this business now faces the risk of EU-based customers turning to cheaper and more efficient competitors in the EU.
It is important to remember that this Brexit deal was a choice made by Boris Johnson and his ‘Vote Leave’ government. A less damaging form of Brexit, such as joining EFTA, was always available. Four and a half years after the referendum, we are finally seeing what Brexit means for small businesses in the East Midlands. It’s not the sunny uplands that were promised.