Brexit, year three: Permanent uncertainty in the United Kingdom

Brexit has become the ghost that haunts every room in the United Kingdom, and it still scares some of the country’s inhabitants while others — politicians, mainly — are pretending that former prime minister Boris Johnson “got Brexit done.”

In reality, Brexit is behind inflation that has taken longer to fall than in the rest of Europe, and a sluggish economy that still does not know if it is growing or shrinking. And above all, Brexit has fueled a poisonous debate on irregular immigration and the Sunak government’s determination to deport new arrivals to Rwanda at all costs. Three years have passed since December 24, 2020, when London and Brussels finally closed a Trade and Cooperation Agreement (CCA) that prevented the United Kingdom from abruptly leaving the European Union. The uncertainty of the new scenario did not disappear with a signature. Quite the contrary.

José Sol has been living in the U.K. for years. His firm, the Spanish Ham Master, imports and sells acorn-fed Iberian ham and provides ham cutting courses and demonstrations at events — some as select as the Royal Ascot horse races, and boxes in the Premier League. It has been successful. It is a small company, but it serves as an example to see how the majority of European companies that trade with the United Kingdom are subject to a constant exercise of prevention and damage reduction. “For months now I have had a manager working on the new documentation that they are going to require from 2024,” explains Sol. “My day-to-day life is overwhelming, and I can’t pay attention to the paperwork, so that’s why I have someone working in it,” he says.

On January 31, obligatory sanitary and phytosanitary controls on agricultural and livestock products crossing the English Channel will finally come into force. The EU immediately applied them to all products coming from the island. The United Kingdom has already delayed applying these controls as many as five times. The government is aware of the chaos that could be caused to its importers, and above all is fearful that prices of grocery items that are already more expensive this year due to runaway inflation will skyrocket.

Sources from the Spanish Economic and Commercial Office in London say that what happens in just over a month will be very important when it comes to verifying, once again, whether or not the obstacles created by Brexit can be overcome.

At the end of August, the British government presented its new Border Target Operating Model. The apparently more simplified method for carrying out security and health controls on imports and exports includes smart seals and GPS locators on many of the products.

The new controls will be rolled out in phases over the next year. From January 31, health certificates for medium-risk animal and plant products from the EU will be introduced. It will not be until April 30 — if the announced deadlines are finally met — that British customs officials will carry out physical and identity checks on many of these products and demand the mandatory documents from the importer.

Finally, it will not be until October 31 that all the security declarations imposed by the Brexit Trade Agreement will finally be demanded at customs.

It gets more difficult with each new year

“Until now, EU companies have been able to ship goods to the U.K. in the same way as they did before Brexit. From next year that will change, and we could face serious disruption again,” warns Shevaun Haviland, director general of the British Chambers of Commerce (BCC). “Rules and regulation are never going to be static. Both the EU and the U.K. will be making significant changes over the next few years, all of which could have major repercussions. We will have to be flexible so that the impact of these alterations is minimal, because no one is interested in the commercial relationship between the two blocs being even more damaged,” Haviland says.

The BCC has carried out a very extensive study, in which it has consulted more than 730 small and medium-sized companies about the impact of Brexit, three years after its entry into force. The conclusions are not optimistic. 60% of firms believe that trading with the EU is more complicated and difficult today than a year ago. 49% disagree with the idea defended by the Conservative government that leaving the European club would help increase sales. “We have found that the U.K. has experienced a very significant contraction in its trading capacity, in terms of the range of products exported to the EU, since the trade deal came into force. We estimate a loss of between 20% and 42% of exported varieties solely in the first fifteen months,” says the report on the impact of Brexit carried out by economist Jun Du for the Aston Business School and cited in the BCC study.

Waiting for Labour

Along with the new sanitary and phytosanitary controls planned for 2024, British companies face other equally onerous changes. The EU began to apply the Carbon Border Adjustment Mechanism in October 2023, as part of a transitional phase. British exporting companies will be required to report the greenhouse gas emissions involved in manufacturing their products. And there will be new taxes starting in January 2026.

Through its study, the BCC has also discovered that almost 87% of the companies consulted were unaware of the new EU VAT (Value Added Tax) rules. “From January 2025, if you are a chef living in the United Kingdom and teaching EU students, even virtually, you will have to pay VAT in the EU member state where your clients reside,” director of Trade Policies of the BCC William Bain explains.

The trade agreement signed between London and Brussels includes a review of its clauses starting in 2025. The leader of the Labour opposition, Keir Starmer, has promised a renegotiation with the EU if his party gets into government. The general election is due to be held in 2024, and all polls point to a possible Labour victory. Community institutions, however, have already made clear their lack of appetite to reopen a treaty that cost blood, sweat, and tears to conclude. Paradoxically, on the continental side of the English Channel, the page has already been turned. It looks like the EU did “get Brexit done” while on the island Brexit continues to be a source of constant uncertainty.

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