Almost one in four domestic exporters have reportedly stopped trading with the EU since the UK left the single market and customs union on 1 January 2021.
The Federation for Small Businesses (FSB) polled 1,483 small firms and found 23% had temporarily halted sales to the EU. A further 4% of small exporters had stopped selling to the bloc altogether since Brexit.
New trading rules took effect at the start of the year, increasing the amount of red tape firms on both sides of the English Channel have to deal with in order to trade goods.
Mike Cherry, chairman at the FSB, said:
"At a moment, smaller traders that do business internationally are being hit with some incredibly demanding paperwork. They are struggling and considering whether exports are worth the effort anymore.
"Three months on from the end of the transition period, what we hoped would prove to be teething problems are in danger of becoming permanent, systemic ones."
The major problems
More stringent customs declarations and safety checks have been in place at the borders since 1 January 2021, causing 55% of small exporters to seek expert help to handle the extra admin duties.
Popular options include using the services of freight forwarders who arrange clearing goods through customs, customs agents or brokers who can act as a direct or indirect representative, or fast parcel operators who can deal with customs as part of their delivery service.
Changes to VAT have also kicked in, meaning VAT is collected at the point of sale rather than from the point of importation. This ensures UK supply VAT, rather than import VAT, is due on consignments exceeding £135.
In addition, 32% of UK exporters had lost goods in transit in the last three months, while 34% experienced goods being held indefinitely at EU borders often for more than two weeks.
SME Brexit Support Fund
From 15 March 2021, small exporters can apply for government grants of up to £2,000 to help them adapt to the new customs and tax rules when trading with the EU.
SMEs that solely trade with the EU are being encouraged to apply for the support, which offers traders training for new customs, rules of origin and VAT processes.
"The SME Brexit Support Fund marks a much-needed intervention, and we'd encourage all those struggling to manage new requirements to apply, and for the Government to dedicate further resources if the fund is exhausted, rather than turning down applications," added Cherry.
"Unless more is done to ease the admin burden on those that do business overseas, and increase access to markets outside the EU, it will weigh heavy on our efforts to recover from the most severe downturn on record."
What does the future hold for exporters?
The Government has set out a new timetable for introducing import border control processes to enable UK businesses to focus on their recovery.
Full import border control processes will now be introduced on 1 January 2022, six months later than originally planned.
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