Yahoo Finance ‘It was a nightmare. It still is’: the cost of doing business, eight years after Brexit
Exactly eight years ago, the UK went to the polls and voted to leave the EU.
Ending a union that had begun in 1973, the decision was bound to have a profound impact on businesses both in the UK and on the continent.
The exit from the single market – which ensured the free movement of goods, services and people between the UK and EU – in 2021 has hit all aspects of industry, from trade to hiring workers.
A report just last week by the Centre for Economic Performance concluded that Brexit had had a negative effect on UK trade, with exports and imports lower than they were in 2016 in real terms, having shrunk by 1% and 2% respectively.
According to the report, trade with the EU has declined less than many economists expected overall, and some sectors of the UK economy, such as services, have continued to be successful. However, many other business sectors have not fared as well. Whether it is UK clothing exports dropping by a fifth since 2019, or the 56% fall in poultry exports, many sectors are still adjusting to a life outside the EU.
The tail of Brexit continues to wag, as new border checks since April have led to fears of more disruption, with estimates putting the cost to businesses bringing in food and plant products at £2bn. And the reverberations are still being felt by businesses large and small.
To mark the eighth anniversary of the referendum, the Observer spoke to six companies in the UK and the EU to see how Brexit has affected their business.
‘There are now 50 more steps’
Royal Lemkes, plant exporter, Bleiswijk, the Netherlands
“There are now about 50 more steps that we have to take now on exports compared with before Brexit,” says Maurits Philippo, business unit manager at Dutch flower exporter Royal Lemkes.
The company is based in Bleiswijk, and sources and transports plants to Ikea and B&Q in the UK. Its subsidiary Floréac supplies smaller independent garden centres across Britain.
The company, which has a turnover of €275m, exports to 31 countries, but the decision by its third biggest foreign market to leave the EU has resulted in significant changes to its operations.
Philippo says that before Brexit the only real difference between trading with the UK and other EU countries was the exchange rate. Now, the process includes customs declaration forms, plant health certificates and nearly 50 other additional post-Brexit actions.
“We had to make changes in our IT system, and brought in two extra staff just to work on just exports to Britain,” he says. It also now leases its own distribution centre in East Yorkshire because of Brexit.
Royal Lemkes decided to continue supplying the UK. Others simply gave up. “A lot of smaller export companies, where only a small percentage of trade went to Britain, stopped supplying,” says Philippo. “They said, ‘this looks too difficult, this will never work, we will focus on our French or German customers’.”
For Philippo, the extra costs are the most significant impact for importers. And these costs increased further on 30 April with the introduction of new border checks on many plant and animal products coming into Britain from the continent. Under the new rules, some loads are sent to border posts along the coast, with companies charged for the process. Often, the posts can have different charging structures.
“This makes it difficult to know what the final charge will be, and eventually those will go onto our cost prices and finally on to the [British] consumer,” he says.
He adds that some Dutch exporters are reporting instances of plants being damaged or delayed during the checks at these posts, resulting in lost revenue.
“With these new checks, companies are saying it is too complicated, and after several years’ trading with the UK, they are stopping,” he says.
‘Brexit has made us busy’
MDDP, legal firm, Warsaw, Poland
While it may have been sold by some as a way of cutting red tape, Britain’s exit from the single market has presented numerous new rules for exports and imports.
This has led to an increased demand for lawyers and customs agents to help confused businesses navigate the new landscape.
“Brexit has made us really busy,” says Agnieszka Kisielewska, international trade and tax partner at Warsaw-based law firm MDDP.
In 2020, the business saw the number of customers seeking trade advice double. In 2021, the number of customers more than doubled again, and MDDP had to increase its trade team by a quarter.
One of the best known tax advisers in Poland, the firm’s expansion has coincided with a boom in Polish trade with the UK since Brexit. Total bilateral trade hit £31.2bn in 2023, up 28% on 2019, while the value of imports reached £20.5bn, up more than 29% from four years earlier.
Kisielewska says this growth has also led to more Polish businesses seeking advice on how to set up warehouses in the UK.
“Polish companies want to keep customers in the UK as happy as they were before Brexit, and one of the solutions has been to set up warehouses so they can supply customers more quickly,” she says.
The new customs rules, excise duty and VAT regulations have led to some struggles, but she believes Poland’s location on the edge of the EU and experience of trade with non-EU nations have left it more prepared than some other countries.
“We are used to exporting outside the EU and have only been in the union for 20 years, so most companies have knowledge of life before the EU,” Kisielewska says.
‘Hugely expensive’
Wack’s Wicked Plants, carnivorous plant trader, Yorkshire, England
When Peter and Helleentje Walker were preparing for the Chelsea flower show last year, they were quietly confident, having previously won three gold medals at the event.
However, just weeks before they were to travel down to London from their base in Scampston, they were forced to pull out due to Brexit rules. “The new rules meant we couldn’t get hold of plants we needed,” he says.
After meeting in the Netherlands in the 1980s, the Walkers began their Wack’s Wicked Plant business, which specialises in carnivorous plants, with just one polytunnel 12 years ago. Today, they have six. Before the Brexit vote, they had steadily increased exports and begun building a reputation across the EU. Since leaving the single market, they haven’t exported anything.
“Before, you just needed a plant passport and that was it. Now you need [phytosanitary] inspections that are hugely expensive,” says Peter.
“If we have a customer from Spain who wants five plants for £70, it might cost £80 for the inspection – nobody is going to pay that,” adds Helleentje.
But the biggest headache for the Walkers has been new barriers for bringing in plants. Most of their stock begins life in Europe as young plants before being grown in their polytunnels. Many are protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (Cites). Before Brexit, no paperwork or checks were needed to bring Cites plants to Britain from the EU.
“All of a sudden, sarracenias and Venus flytraps, our two bestselling plants, needed licences and permits before they could be brought in,” Peter says, referring to when Cites controls were implemented last year.
Since then, they say, they have been “banging their heads against the wall” for 15 months with the authorities, sometimes waiting up to six weeks for the right documentation for deliveries. This came to a head last May when they had to pull out of Chelsea because of Cites issues.
“I’ve never experienced anything as stressful as what happened when Cites came in,” Peter says. “It was an absolute nightmare. It still is.”
‘We dumped our UK supplier’
Denroy, manufacturer, Bangor, Northern Ireland
There are very few companies that can list components for Typhoon jet fighters and salon-standard hair brushes in the range of products they manufacture. Northern Irish company Denroy can do just that.
Founded more than 50 years ago in Bangor as an injection moulding company, its Denman brush shot to fame in the 1960s after Vidal Sassoon declared it the perfect brush for blowdrying hair.
Since then, 3m Denman brushes have been sold globally and the £30m turnover company has diversified to supply wing components for Airbus and Bombardier, among other things. It is confident that it can double its turnover in four years.
Under the Northern Ireland protocol, says Kevin McNamee, Denroy’s chief executive, “we really have the best of both worlds. We have free, unencumbered movement of products manufactured to EU standards into any EU country, while also being guaranteed unfettered access into Great Britain.”
He adds that, while politicians don’t like to say it publicly, Northern Irish companies have a “competitive advantage” over those in Great Britain when it comes to trade.
For goods coming to Northern Ireland from Great Britain, paperwork must still be provided to show they comply with EU laws, and won’t travel beyond Northern Ireland.
The Brexit fallout has caused other problems for British firms that want to send products to Northern Ireland. Products manufactured in the UK can be exported to Northern Ireland and the EU with zero tariffs, under the UK-EU trade and cooperation agreement. However, EU rules of origin regulations mean that products being sent from the UK that have originated outside the UK or EU could be subject to tariffs.
This can make it less attractive for some Northern Irish firms to trade with Great Britain over EU countries where the tariffs don’t apply.
“In the year or so after Brexit, we paid tens of thousands of pounds on tariffs,” he says. “In some cases, we simply re-sourced the supply, so unfortunately the GB supplier got dumped and we went directly to the EU to avoid tariffs.”
‘Customs no longer applies’
Kingsland Drinks, wine bottler, Greater Manchester, England
On the outskirts of Manchester, next to the ship canal in Irlam, sits the Kingsland Drinks bottling plant.
Employing about 450 people, Kingsland’s main business is importing huge 24,000-litre bags of wine from across the globe, bottling it, and shipping it to supermarkets and retailers. Approximately 80% of the wine it receives comes from the New World regions, with the majority of that from Australia and New Zealand.
With so much of its business focused on these markets, it has seen some tangible benefits of trade deals with the two countries since Brexit. The deals, struck in December 2021, removed tariffs on all goods, and were sold as a huge post-Brexit bonus.
“Our customers and the end users have seen the benefits, because EU common customs applied on wines from both countries and now they don’t,” says Ed Baker, the managing director at Kingsland.
The company expects to save about £1.1m in customs duty on the wine it imports from New Zealand in the first year of the deals, and £3.2m from Australian imports.
But while Brexit has reduced costs for consumers with one hand, it has heaped on costs with the other.
The new post-Brexit alcohol duty regime saw excise duty on most bottles of wine increase by 44p in August last year. “For an Australian wine you might lose between 7.5p and 9p on the removal of tariffs but you’ll be paying 44p more on excise duty, and that’s ignoring the extra VAT too,” says Baker.
These rules will be altered again from February 2025 when the amount of duty paid on each bottle of wine rises even further, up by 2p for every 0.1% increase in strength. This means that bottles of wine with the highest alcohol by volume could see an extra 43p added next year.
‘This has scuppered it’
Amber Violins, musical instrument trader, Gloucestershire, England
As a trader in secondhand violins, cellos and bows, Amber Violins is reliant on the EU for both sourcing and selling goods.
Before Brexit, its owner and only full-time staff member, Matthew Gryspeerdt, used to travel regularly to France to dealers where he would pick up the instruments and bring them back to auction on his website.
Before Brexit, importers only had to pay VAT on the margin of the sale, but since Brexit everything imported, even if secondhand, is charged at full VAT.
“So if I buy for £100 I’ve got to sell for £120 before I start to make anything myself – so that margin, which was my profit margin, that has disappeared,” he says.
“I had developed the business to a stage where I was putting them onto the auction website and selling around 1,000 units a year,” says Gryspeerdt. Since Brexit, the website has gone, with the number of instruments sold each year down to about 40.
“I now focus a lot more on the higher-value and more expensive items to cut down on the bureaucracy,” he says. “Brexit completely scuppered it, really. I basically couldn’t bring stuff in without a shipping agent, and that wasn’t feasible for a small business like mine.”
