Coping with the after-effects of Brexit has been tough for many businesses. But the impact it’s had on British businesses that import or export goods to/from the European Union (EU) has been particularly deep. The United Kingdom (UK) left the EU in January 2020, so Great Britain (GB) and Northern Ireland (NI) are no longer EU member states. Because of this, GB and NI businesses can no longer enjoy the benefits of being part of the EU trading block.

Some transitional measures were in place to make the exit less painful for British traders. However, as of 1 January 2022, these transitional measures have now ended. This is making it harder for your British clients to trade effectively and profitably with EU member states.

So, what has actually changed when it comes to import/export? And what can you do to make life easier for your clients when it comes to trading with Europe and the wider world?

New hurdles to effective trading with the EU

Trade with the EU dropped significantly between January 2020 and January 2021. UK goods exports to the EU fell by 45%, and UK goods imports from the EU also fell by over 30% at the start of the year. Figures were still down around 20% in August 2021 compared to December 2020, according to recent data from the Office for Budget Responsibility (OBR).

This decline in trade with our nearest neighbours is worrying, and will have had severe consequences already for many smaller UK traders. But when you factor in the end of the main transitional measures, it’s clear that there are more hurdles for UK businesses that want to continue trading with Europe.

Key issues for clients to consider include:

  • We’re no longer an EU member state – as a nation, we’re now outside the EU single market, the customs union and the VAT zone. Pre-Brexit, British companies had free and frictionless trade across all member states. This made trade with EU member states simpler, logistics more straightforward and good profit margins easier to attain.
  • Trading with Europe is now more challenging – the UK is now outside the EU, so imports and exports to/from any EU member state have to be treated in the same way as any other international location.
  • Red tape got more complex and time-consuming – when trading with EU member states, British companies now have more bureaucratic red tape to deal with. There are additional forms to fill out, new software systems to learn and manage, and extra costs to bear when clearing goods through customs.
  • Costs have sky-rocketed – the additional admin and bureaucracy is adding huge amounts of time to the import/export process and costing British SME clients more in overheads. In turn, this is cutting back on their margins and making it unprofitable for some well-established businesses to carry on trading with Europe.

These are significant challenges for your trading company clients to overcome. But with the easing measures now removed, what other hurdles do clients need to overcome?

The key changes to import/export

Since Brexit came into effect, Great Britain and the EU no longer apply the same customs rules, regulatory standards or enforcement mechanisms. This means border checks are needed to make sure the right customs duties are being paid, taxes are being collected and safety regulations are being adhered to.

From the start of January 2022, these are the extra changes that British trading companies will need to factor in when trading with the EU:

You can find links to the UK entry summary declaration here and the EU exit summary declaration here.

Helping clients add up the numbers

Half of British businesses have already decreased or stopped their trade with the EU, according to recent research by the Institute of Directors. Losing a key market, like the EU, is likely to have a profound impact on your SME clients’ revenues. Poor revenues could have a knock-on effect, with poor cash flow, mounting debt and, in the worst cases, business failure.

So, what can you do to help your EU-trading clients get through this challenging period? And how do you help clients return to healthy trading activity and profit margins?

Areas where your firm can add value may include:

  • Helping clients understand the key post-Brexit customs and VAT changes
  • Ensuring clients are keeping the right customs and VAT records
  • Introducing clients to third-party customs brokers to enhance their customs processes
  • Setting clients up for postponed VAT accounting to ease their cash flow
  • Helping clients refocus on the most profitable goods to increase their margins
  • Producing a workable funding strategy to cover the increased costs of trade
  • Looking at the viability of the client’s current EU trading business model – and the feasibility of diversifying into new markets, new products and new trading partners.

Many clients are likely to need help sorting out the additional customs and VAT admin burden. And they’ll also need assistance when it comes to sorting out their finances and funding to get them back on an even keel. As their trusted adviser, you’re well-placed to guide clients through the turbulent post-Brexit waters. By opening up new routes to finance, you can help to cover the rising costs of EU trade. And with more cash in the kitty, the smaller margins and increased expenses won’t bite quite so hard.

At MarketFinance, we can still help your clients access the Recovery Loan Scheme. Loans of up to £350,000 can be accessed by clients that have been adversely affected by Covid and are also feeling the heavier burden of higher EU trading costs.

Get in touch with the team if you have any questions about access to funding for your trading clients.