Blog

By Gary Griffiths

21 May 2019

Brexit has dominated news headlines for months with the UK no closer to agreeing a deal with the EU. What many people don’t realise, however, is that this is just the first stage of a lengthy process. After it formally exits the EU, the UK will need to agree its future trading relationships.

The UK’s trade policy has unsurprisingly been hotly debated throughout Brexit discussions. For a long time, the UK has prided itself on established and streamlined import and export processes, which allow British businesses to trade in tandem with the EU. After years of development, Brexit threatens to alter these carefully mapped connections. Indeed, three years since discussions began, we’re still no clearer on what to expect from our new trade policy: deal, or no-deal. If there is one thing the negotiations have made clear, it is how heavily SMEs rely on trade, particularly imports, and the threat Brexit represents to them.

Importing remains important

Historically, imports haven’t had the same focus as exports when it comes to the UK’s trade targets. But we are surrounded by imported goods, whether we recognise it or not, and many SMEs need these imports to survive. We recently found that over a quarter (28%) of SMEs currently import, a figure that has been gradually increasing since Q2 2018.

Our Q3 2018 SME Confidence Tracker revealed that a third of the 1.1 million UK SMEs with EU suppliers would be unable to operate without imports from the Single Market, while three-fifths (61%) would see a decline in profits, illustrating the true extent of SME reliance on EU suppliers for survival and business growth. It is little wonder that SMEs are demanding more from the Government with regards to both clarity and support with trade. Half (50%) of SMEs say they want the Government to ensure tariffs on goods to the EU are avoided, while almost two-fifths (38%) want trade deals with new markets. That is, of course, if the UK leaves with a deal.

The UK relies on goods being moved quickly through the border. A no-deal scenario could equal a customs nightmare. If paperwork is introduced and completed incorrectly, it will hold up the queue and potentially create a huge blockage; slowing down supply chains and negatively impacting business and customer relations.

Even with simplified customs procedures for those SMEs that have registered for Transitional Simplified Procedures (TSP), the consequences would be catastrophic. The imported goods SMEs need to operate would likely be delayed, causing revenues to fall and a shortage of goods on shelves for consumers.

Adjusting supply chains

At BFS, we’re encouraging SMEs to be proactive amid Brexit uncertainty. Whether that is registering for a UK Economic Operator Registration and Identification (EORI) number, supply-chain mapping or renegotiating contracts with suppliers, there are numerous steps that can be taken to adequately prepare. For example, SMEs could offer to pay for goods in advance. As well as helping to bolster relationships, suppliers might be more open to offering a discount if they are paid up-front, enabling better cashflow management.

Whatever happens, trade deals need to remain a priority for the Government in the weeks and months ahead.


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