Businesses brace themselves for disruption despite post-Brexit trade deal

But despite the delay, for the first time in nearly half a century, food, motor vehicles and other goods transported between the EU and the UK will be subject to customs controls from January 1, and will have to comply with separate sets of standards and regulations.

The UK government estimates there will be 215 million additional customs declarations per year, nearly 600,000 per day, which companies say will take time and money to organize. Some companies have to pay inspection fees, apply for import permits and figure out how to justify the value added tax. UK exports of food and animals to the EU are checked upon arrival, while some professional qualifications are no longer automatically recognized. Some companies say they don’t yet fully know how they will respond as they have yet to see the details of the trade deal.

Predicting long lines at UK and European ports, and piles of new paperwork, business groups are now calling on both the UK and the EU to help companies navigate the changes and ease any new frictions in trade, and companies give time to adapt to new rules.

“As it comes so late in the day, it is vital that both sides take immediate action to keep trade moving,” said Tony Danker, the director general of the Confederation of British Industry. The corporate lobby group wants a six-month grace period to allow companies to adapt to the new rules without being penalized.

Businesses face “the daunting task of adapting to new regulations barely a week before they take effect,” said Adam Marshall, Director General of the British Chambers of Commerce. Many companies are already grappling with the pandemic and are leaving staff for the Christmas holidays, he said, asking for new rules to be phased in.

The US Chamber of Commerce at the EU also called for new rules to be phased in and said members were concerned about how quickly they would have to adapt. Asked at a briefing Thursday about possible room for maneuver for companies, an EU official said “there is no grace period in this agreement … We think companies have had a lot of time to prepare for this.”

A spokesman for the UK government said it is preparing for the coming changes, including investments in jobs, technology and infrastructure at the border. He also said border checks would be carried out in stages.

Thursday’s deal isn’t entirely focused on the services sector, like Britain’s massive financial sector, which will lose automatic access to EU markets on January 1.

Fearing additional paperwork and transportation disruption, pharmaceutical companies such as Pfizer Inc.

and GlaxoSmithKline PLC had already stocked drugs, automakers including BMW AG

built up stocks and aircraft manufacturer Airbus SE asked suppliers to keep additional components on hand.

On Thursday, Airbus said it was pleased that the potential disruption of a no-deal scenario had been avoided, but that it still needed to analyze the deal’s impact on its operations.

“While a free trade agreement is a great relief, doing business in Europe is still much more complex than it was when we were in the EU,” said Simon Cotton, CEO of Scottish cashmere clothing manufacturer Johnstons of Elgin Ltd. He cited additional paperwork on various issues, including how EU customers reclaim tax.

Additional red tape could cost UK businesses around £ 17 billion, which equates to around $ 23 billion a year, and EU-based companies around £ 14 billion, according to estimates by law firm Clifford Chance.

For example, meat exporters from the EU and the UK now need a certificate – confirmed by a veterinarian – proving that every package they sell meets the other’s health standards. British exporters say there are not enough veterinarians for this certification.

Anticipating delays at the border, Delamere Dairy has been laying packaging and ingredients at the site in the north of England since November.

“We are concerned about the potential disruption in ports. You don’t want your packages waiting in a seven-mile queue when you need them to pack products,” said Ed Salt, Delamere’s general manager. Although it is mainly sold in the UK, the company ships goat’s milk to be packaged in Germany before returning to the UK.

It will also have to heat treat the pallets it uses to ship products to comply with EU rules for pallets coming from outside the block.

EU-based companies sell more goods and services to Great Britain than the UK to Europe. But the UK’s trade in goods with the EU is a greater percentage of its gross domestic product, about 13%, than Europe’s exposure to Great Britain, at nearly 3% of GDP.

However, some parts of the bloc are particularly exposed to UK trade.

Britain is responsible for 10.5% of Ireland’s exports and 27% of imports, according to the Organization for Economic Co-operation and Development, while Germany has a £ 29 billion trade surplus in goods with the UK, mainly due to its nearly 600,000 cars it sells. to Brits every year.

Few industries are more likely to feel the disruption than the $ 88 billion in two-way trade in cars between Britain and the EU.

The UK is Europe’s second largest car market and the country’s largest sellers: Ford Motor Co.

, BMW, Volkswagen AG

and Daimler AG

– mainly assemble their vehicles in the EU.

Last year, about 13% of cars produced in Germany went to the UK, while Britain is Ford’s third largest market worldwide, accounting for about 30% of sales in Europe.

Meanwhile, British-made parts, including engines for Ford vehicles, are being exported to European factories producing vehicles that are sold around the world.

The European Automobile Manufacturers’ Association said it would not be able to make a full assessment of the trade deal until all details were public, but that “major challenges still lie ahead”.

Trade in goods will be heavily affected by trade barriers in the form of new customs procedures, he said.

Foreshadowing potential bottlenecks, Japanese car manufacturer Honda Motor Co.

earlier in December a car factory in England idled after major components were short. It blamed the congestion in UK ports, which was under pressure from Brexit and Christmas-related supplies, as well as the disruption caused by the pandemic.

Some car companies, such as Aston Martin Lagonda Holdings PLC, have said they can fly parts to the UK to avoid future disruptions. The maker of the fictional car of the British spy James Bond gets 50% of its components abroad.

Analysts are particularly concerned about volume producers such as Ford and Toyota Motor Co.

and the French PSA Group,

that deploy just-in-time supply chains where the arrival of parts is closely aligned with the assembly.

For example, Toyota has normally only kept four hours on the production line at its UK car plant. In 2015, a three-week strike by French ferry crews disrupted operations for two months.

“Incredibly complex supply chains are the problem when you have been operating your factories for 20 years with the idea of ​​a single market,” said Calum MacRae, an automotive analyst at GlobalData.

Write to Alistair MacDonald at [email protected]