The fifth anniversary of the referendum vote is fast approaching (June 23) and there is little sign that anti-EU outrage in much of the UK media has decreased – rather the opposite. But below the sound and fury (currently focused on the Northern Ireland Protocol) it is easy to miss the steady drumbeat of bad news about the negative impact of Brexit on UK businesses – in particular on our small and medium enterprises (SMEs).
The figures speak for themselves: in the first quarter of 2021 exports from the UK declined by 40%, imports by 29%. Some of the difficulties faced by British exporters were due to the pandemic, but according to the British Chambers of Commerce, many are not. “These are structural issues that if they continue to go unaddressed, could lead to long term, potentially irreversible weaknesses in the UK export sector” its co-executive director Hannah Essex is quoted as saying in a CNN report in April.
For many companies reliant on exporting to the EU, or with suppliers on the continent, the last few months have been a nightmare. It has been calculated that UK businesses will be faced with processing over 200 million extra customs declarations each year. Confronted by a tsunami of paperwork, confusing regulations, escalating transport costs, delays of essential materials and a shortage of specialist advice and support, it’s no surprise that many SME owners have considered giving up altogether or moving lock, stock and barrel to the continent.
In Sussex, 60% of companies polled were thinking of downsizing, offshoring or shutting down
This was certainly one of the findings from a survey that EUnityLewes ran in March to discover the impact of post-Brexit trading on local businesses. It found that 60% of those responding were considering downsizing, offshoring or shutting down their business. And the majority of respondents felt that leaving the Customs Union and Single Market had made trading more difficult or impossible. Many Sussex SMEs have built up close ties with customers and suppliers across the Channel over many years, and quotes from the survey underline the profound damage that has been done to those relationships by Brexit.
To find out more about how individual businesses are faring post-Brexit, Sussex Bylines spoke to two people involved with successful Sussex-based export enterprises – Paul Mellor, managing director of the wonderfully-named Pads4Labs Ltd and John Baxter-Smith, in charge of European sales and distribution for W. S. Wilson Corporation, a US manufacturer of small aircraft parts.
Paul Mellor’s company is based on a small industrial estate in the shadow of the South Downs, and currently employs five people making what are known as “Cinderella products” used in the manufacture of reading glasses. He is deeply concerned about the future of his business as profits are eroded by delays, confusion and additional paperwork.
“The whole freight industry is in absolute bloody meltdown,” he says. “In the past we would ship a pallet of goods to Frankfurt and it would cost us £109 and take four to five days. Now you are lucky if you can get someone to quote for it, and the cost is about £270, plus a lead time of about two to three weeks if things go well. That’s a big impact on my profit margins and cash flow.
“Each European country has a different protocol, so the paperwork has to be done differently for Germany than for Italy,” Mellor explains. “And when you go onto the government’s website to take advantage of the much-advertised help, it’s like going down the rabbit hole in Alice in Wonderland.”
Aren’t these just inevitable teething problems?
“The increase in costs is permanent as is the damage to relationships with customers that have been built up over years,” Mellor responds. “To go ahead with this when Covid was already causing enormous damage to cross-Channel trade was reckless in the extreme.”
At the mention of Jacob Rees-Mogg’s reassurance that things will be fine in 50 years’ time, Mellor snorts: “If I were to meet Rees-Mogg I would tell him that I will be dead in 50 years and I won’t have a business in 50 weeks.”
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As a result of which he is seriously considering moving his business lock, stock and barrel to the mainland of Europe.
“The big boys will set up a European subsidiary but that level of cost is not feasible for a company only doing £1m turnover a year. So the alternative is to move. Some countries are currently offering very attractive incentives to encourage people to relocate.”
Both Mellor and John Baxter-Smith describe the huge level of stress caused by Brexit.
“Our business model was based on the customs union and single market and the free flow of goods. It’s unsustainable in the light of Brexit,” says Baxter-Smith.
“The [aircraft] parts that were shipped from the US to our subsidiary in Northern Ireland – and the UK and then to various subcontractors – were imported on zero duty, but now there’s a nightmare of duties payable in both directions, from the UK to mainland Europe and the reverse. Every delivery so far has gone pear-shaped.”
Again, the impact on individual lives and businesses is only too evident as he adds: “I’ve been doing this for 20 years, but now only inertia is keeping us going.” He is despondent and deeply pessimistic about the long-term survival of the UK-based business.
Mellor sums up the sense of frustration and betrayal shared by many small business owners faced with the consequences of Brexit. “I don’t want to be competing with people half-way across the world who are paying their staff a derisory wage. As far as I’m concerned, EU regulations were largely positive and I can’t think of a single one that had an adverse impact on our business.”
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