SMEs suffering the most one year on from signing of the Brexit trade deal – Lords Committee

Small businesses and agri-food sectors have been hardest hit by the changes to the trade in goods following the implementation of the Trade and Cooperation Agreement (TCA) nearly a year ago.

In a report published today (Thursday 16 December) One Year on: Trade in Goods between Great Britain and the European Union, the Lords European Affairs Committee calls for the UK Government to do more to support SMEs, including reinstating funding to help small businesses to access professional support.

Since the agreement of the TCA and the end of the transition period, businesses trading goods between Great Britain and the EU have faced challenges because of new administrative burdens. The Committee finds that additional administrative burdens have fallen particularly heavily on smaller and medium sized businesses with fewer resources to draw upon to help them adapt. This has affected SMEs both in the UK and in the EU.

Sanitary and Phytosanitary (SPS) requirements, designed to protect humans, animals, and plants from diseases, pests, or contaminants being imported or exported, have continued to present a major barrier to GB exports of agri-food products since the agreement of the TCA.

For businesses in the agri-food and drink sectors this has been exacerbated by the volume and perishable nature of products they trade in, resulting in GB exports become slower, less competitive, and more costly.

The Committee calls on the UK Government to seek an agreement on SPS with the EU as an urgent priority and to do more to provide access to professional support for small businesses. The Committee recommends that the Government restore a version of its SME Brexit Support Fund but with wider eligibility criteria businesses were only eligible for support from the original fund if they traded exclusively with the EU.

The Committee’s report also investigates the Government’s recent delay to the introduction of certain UK import controls. It concludes that the arguments for and against this decision are finely balanced, with some businesses welcoming the extra time but others arguing that the delay has undermined business planning and puts UK exporters at a competitive disadvantage to their counterparts in the EU.

The Committee also expresses significant concern about the imminent expiry of the grace period for suppliers’ declarations on rules of origin, and the introduction of the requirement for full customs declarations, on 1 January 2022. The Committee warns that there is likely to be some further short-term Brexit disruption in the New Year as these new requirements are phased in, though how extensive this turns out to be will depend on the Government’s attitude to enforcement of the new rules. The Committee also urges the Government to do all it can to communicate the new requirements, particularly to small businesses, ahead of the deadline.

Lord Kinnoull, Chair of the Committee, said:

“The frictional impact of the new trading environment on business since the implementation of the TCA on 1 January 2021 has been uneven. Smaller businesses, which often lack the resources to adjust to new administrative burdens and, in some cases, delays, and the agri-food sector, which faces an additional set of issues in the form of sanitary and phytosanitary requirements (SPS), have been particularly hard hit.

“With further customs and rules of origin requirements for importers coming down the track in a matter of weeks, it is vital that the Government communicates these deadlines to businesses and enforces them in a patient and pragmatic manner.

“It is important that these current challenges do not disincentivise GB-EU trade in either direction. We urge the Government to engage the EU in further dialogue and utilise, in particular, the TCA Specialised Committees in order to reach a more flexible and more comprehensive set of arrangements.  The goal for both the UK and the EU should be to develop a mutually beneficial and truly efficient trading relationship.”