At the start of this year I and many others wrote that Boris’s deal would results in empty shelves in super markets:
The story of empty shelves only partly came true. Some supermarkets have had empty shelves at different times, while specialist on line retailers have much bigger problems – one I use has roughly half of it’s lines out of stock. The biggest problem right now is pet food, not human food. January saw the largest drop in imports and exports in history, but on the whole we have done better than we might have done.
While all this was going on Brexity newspapers went large on the odd decision by Dutch customs officials to confiscate cheese and ham sandwiches from British truckers:
So what happened to the food shortages, and why did Dutch customs confiscate those sandwiches?
Let’s start with Boris’ oven ready deal. The UK runs a trade deficit in goods (we import more from the EU than we export), and a big trade surplus on services (we export more to the EU than we import). We agreed to free trade in goods (where the EU has a surplus) but not in services (where we have a surplus). This is a completely one sided deal in the EU’s favour. It gives the EU a permanent trading advantage over the UK. Services are the majority of the UK economy and for them Boris delivered No Deal.
Having insisted that we couldn’t extend transition due to Covid at the last minute we did extend transition, but didn’t tell voters. We delayed the introduction of new customs arrangements to 1st April because we weren’t ready and we feared food shortages.
This extension to transition only applied to EU companies sending goods to the UK, not UK companies selling to Europe. We had the full force on day one with no time to prepare. This created another big advantage for EU companies sending goods to the UK (no customs checks) vs UK companies sending goods to the EU (strict customs checks).
This might sound crazy, but there is a political logic behind it for Boris.
Let’s start with fish. Most of the fish and seafood we catch in the UK we export, most of the fish and seafood we eat in the UK we import. The new customs checks have had a devastating effect on the fishing industry and might drive half of UK seafood exporters out of business. This is a problem, but the number of people who actually work in the seafood industry is tiny – it generates loads of exports relative to headcount.
The number of people who eat fish in the UK is 1000 times greater than the number of fisherman. If the fisherman can’t sell fish it is a problem, but it only affects a few thousand people. If the UK can’t import fish it affects millions more people. The Government can hide some bankrupt fishing boats, but it can’t hide the disappearance of popular fish and seafood from our shops and takeaways. We have minimised food shortages, but only by giving up on a key element of Brexit and hoping no-one notices.
HMG has now announced that we are unilaterally extending transition at least until July as we fear food shortages. In reality the chances of us being ready to cope with customs checks at our end without disaster is still pretty slim. We might as well be honest and extend import transition until at least 2022.
But that’s not the end of the problems.
Most trade deals and trading blocs work on the principle of regulatory equivalence – one country accepts that it’s regulatory standards are the same as another country or group of countries. This removes non tariff barriers to trade, and it really important for businesses; if we all agree on a common definition of a bottle of gin it is a lot easier for gin exporters and importers. For any product subject to regulations these non-tariff regulatory barriers are more significant than tariffs. The problem for the UK is that most of our key exports are regulated – food and drink, pharmaceuticals, armaments, Nissan motorcars. A free trade deal which removes tariff barriers but not non-tariff barriers is a big problem for nearly all of our key export industries.
We declined a deal on regulatory equivalence with the EU because we didn’t want to follow EU rules and we wanted to strike multiple trade deals with different trading blocs which had radically different standards.
Lets take chicken; a trade deal with the EU means no chlorinated chicken because it doesn’t meet their regulatory standards, but a trade deal with the US has to include chlorinated chicken. If we accept regulatory equivalence with the EU we can’t do the bigly US trade deal that Donald Trump promised, but didn’t deliver.
The only way to resolve that is Rules of Origin. This means that a food and drink producer will have to account for the provenance of every ingredient in every product. For businesses this is a disaster, and will cost businesses billions to comply with. The value of a trade deal with the USA, if it ever happens, is far less than the costs to British industry of swapping EU regulatory equivalence for rules of origin. We don’t know how we will have to account for and certify our Gin to leave the UK, and we won’t find out what these actual rules are for another 6 weeks.
This is where the ham and cheese sandwich comes in. The UK insisted on strict rules of origin across the board. The rules apply to everything, from a cheese and ham sandwich to a container load of Gin. If you take a cheese and ham sandwich on your travels you will have to produce export documentation including a separate certificate for each part of the sandwich; the origin of the ham, the cheese, the milk in the cheese, the bread, the flour, the yeast, the cheese, the butter, the milk in the butter, and so on.
None of this is being done to us by the EU. These are our choices, made for political expendiency and against the advice of British industry.
So when you next go abroad make sure that you have plenty of paperwork for that packed lunch, particularly if you include something complex like mango chutney. The forms for that could take weeks.
Since I wrote this 2 major reports have been released:
The British Meat Processing Association have released a report outlining the impact of Brexit on the UK meat industry.
It is unrelentingly gloomy:
£120m in extra costs
50% fall in exports
Groupage exports (mixed cargos) has stopped completely
3 days of delays at borders due to paperwork
The additional paperwork is so severe that the MBPA has published a flow chart showing the new process:
The UK Food and Drink Federation have published their own report into changes in UK food and drink exports since the end of transition”
In January UK food and drink exports to the EU fell by 75% year on year. Every area is down significantly with Cheese and Whisky among the worst hit. Imports fell by 25%. Exports to non-EU countries fell by 10% which gives us an idea of how much of the fall is Covid, and how much is Brexit. The vast majority is Brexit.
I am sure that some of this will come back – lots of EU stockists will have built up supplies in November and December before the end of transition. The worrying figure again is fish – you can’t stockpile fresh fish, so there is no stockpiling effect here. Fishing is actually down nearly 89% year on year.
In the meantime the Government has announced that there are grants available for companies like mine to help us cope with the new Brexit bureaucracy. We can get up to £2k to teach us how to fill in the new post Brexit import and export forms
Sadly the Government has outsourced this to PWC and to access to grant to teach you how to fill in the forms you have to go on line to fill in a form
And the form doesn’t work.