For many UK companies, Brexit has completely changed the way business is conducted. A recent DDC FPO survey of UK-based businesses found that 69% expect their operations to be negatively affected by Brexit challenges for more than 12 months. As a result, some UK companies have stopped doing business with the EU altogether.
Brexit challenges for UK retailers and shippers include added paperwork, new tariffs, severe supply shortages, and more. Here are the top 3 issues that UK-based businesses face in a post-Brexit world:
#1: Supply chain disruptions
Brexit-related supply chain disruptions exacerbated bottlenecks created by pandemic lockdowns and staffing shortages, the combination of which has wreaked havoc on UK companies.
According to the DDC FPO survey, 67% of respondents reported Brexit-related delays from third-party suppliers or brokers, and 53% reported an increase in goods held by customs.
Industries with complex international supply chains — electronics, automobiles, and pharmaceuticals, to name a few — have been hit especially hard. Companies with multiple global touchpoints find that key component pieces in their product supply are back-ordered for days, weeks, or months — more touchpoints, more opportunity for crippling slowdowns.
Even companies who didn’t trade with the EU prior to Brexit have been impacted as their suppliers and partners face delays and disruptions, creating a ripple effect that impacts the broader UK economy.
#2: VAT changes
Exiting the single market means that UK-based businesses now need to pay the Value-Added Tax (VAT), a sales tax paid on goods or services within the territory of the Member States of the EU. Different levels of taxation apply to different goods, but every manufacturer, supplier, and retailer selling in the EU is required to pay VAT.
These changes have made shipping between the UK and EU unappealing for both parties, resulting in considerable lost sales. The DDC survey found that 50% of respondents reported Brexit-related impacts on their organisation’s sales.
UK-based e-commerce retailers have been hit especially hard. EU customers want to avoid higher costs related to the additional VAT, and many have started shopping elsewhere in search of better deals. VAT changes have led to an uptick in customer returns to UK businesses (17%), which adds reverse fulfilment and restocking costs to the burden of lost sales.
Additionally, some UK companies are choosing to relocate their operations to the EU to avoid VAT charges, leading to lost business for UK-based transporters.
#3: Customs documents
VAT changes aren’t the only customs-related hurdles that UK companies face. With a host of new certifications, tariffs, and transfer rules comes a slew of customs documents (many of which are costly and time consuming to manage under the best of circumstances).
Take, for example, the T1 document. Let’s say goods en route to Italy will need to pass through customs in France. Fees and taxes are collected at the end destination under EU rules, so French authorities want assurance that any balances will be paid upon arrival. A T1 document is an insurance form backed by a financial institution and serves as a promissory note on the final due fees. T1 documents are challenging to obtain because of their financial requirements, locking out many small and mid-size companies from terrestrial shipping channels.
Additional forms and documents result in more opportunities for costly errors to occur. Research shows that many companies have had to hire additional staff to take on the paperwork burden. Incorrect codes or miscalculated estimates on shipping documents can delay delivery. Export Health Certificates (EHCs) for live animals or animal products are complex and burdensome to complete. Plus, there’s much confusion about what documents are required for specific shipments due to shifting requirements and extended grace periods.
According to an Office for National Statistics (ONS) survey, about 38% of exporters and 39% of importers identified form-filling as their main hurdle. And, with more than 25 official EU languages to contend with, getting fast resolution when a problem arises is increasingly tough.
While these challenges are daunting, there are a few ways to mitigate them:
Assess your supply chain to determine where there’s room for improvement in terms of sustainability and resilience.
DDC FPO has extensive experience handling customs brokerage for UK businesses. We have a team of experts on hand to streamline the processing of your documents and help you clear customs faster, with support available in over 30 languages to help solve customs holds and bottlenecks efficiently.
That way, you can focus on what matters to you: creating value for your customers.