The joy over the EU-UK trade deal was short-lived. Just a week later we ended up in the harsh, everyday reality of the new reality. On credit insurance, the new situation has little to no effect yet, partly because our government's state aid is still applicable at least until 30 June 2021.
Border checks
Companies exporting to the UK did already experience directly what the Brexit means for them. The fact that there will be no import and export tariffs on UK and European products is positive. But on the other hand, there will now be standard customs checks take place at the border, which requires importers and exporters to submit product certificates, among other things. For instance, for meat and vegetables, a certificate must accompany each shipment. In addition, the certification of industrial products is no longer recognised back and forth.
Concerns among exporters
It is one of the issues on which business organisation VNO-NCW is concerned serious concerns makes. 'This entails additional costs for entrepreneurs and creates a significant increase in administrative burden. There is concern among businesses about the capacity on the Dutch side to deal with the extremely many certificates required be able to deliver,' the organisation wrote in late December. 'Furthermore, it will be impractical to visually inspect every batch. Being able to certify electronically and automatically in a simple way is therefore a requirement to keep trade going.'
Bureaucracy leads to lower GDP
Euler Hermes predicted several months ago that increased bureaucracy - along with weak demand and the pound's lack of competitiveness - will become a major factor in the contraction of the UK economy. The international credit insurer expects the UK's gross domestic product to be annually by 0.6 to 1.1 per cent is going to shrink. The top five hardest-hit sectors are minerals and metal products, machinery and electrical equipment, transport equipment, chemicals and textiles. In the report 'Brexit in times of Covid-19', published in mid-January, Euler Hermes and Allianz elaborate on the impact of the Brexit. Download the very interesting (English-language) report here.
Listing uncertainties
There is no doubt that there will be more bureaucracy. But beyond that, many issues surrounding the trade deal are still uncertain and unclear. Consider, for instance:
- Level playing field: there appear to be firm agreements on state aid, taxes and subsidies, among other things, to create a level playing field for UK and EU companies. In practice, we need to see how firm these agreements are and are respected.
- VAT scheme: the UK has been out of the VAT union since 1 January. As a result, entrepreneurs doing business with the UK can no longer reclaim their VAT. At the moment, it is still unclear what they need to do to continue reclaiming their VAT.
- Brexit Adjustment Reserve: this is a joint EU pot designed to cushion the economic and social impact of Brexit for the worst affected sectors. At the moment, it is still unclear which party (such as entrepreneurs or industry associations) can apply where to claim this.
- Clauses: The trade agreement includes clauses that would still allow future restrictions in trade. For example, retaining the possibility of combining the exemption from EU import duties on imported raw materials with UK tariff preferences for finished products that acquired EU origin after processing in the EU. VNO-NCW and MKB-Nederland called for this to be closely monitored and for these loose ends not to become trade barriers.
- Missing elements: in several respects, the trade agreement is still (far) from complete. Little is said about issues such as investment protection and climate policy. Similarly, little has been settled on financial services, while Dutch fisheries will have to sacrifice heavily on access to UK waters over the next five years, without it being clear whether and what compensation will be provided in return.
At Xolv, we cannot - unfortunately - make the Brexit more fun for you. What we will continue to do, however, is to keep you as informed as possible about the consequences for you and your business. So keep following us and - if you have not already done so - sign up for our newsletter.
