How Has Your UK SME Been Faring Since The Brexit Transition?

Posted by Liz Seyi on July 15th, 2021

For a long time, it was seemingly the subject of discussion that we most loved to hate – at least until the COVID-19 pandemic came along. But the fact remains that no small or medium-sized firm in the UK that trades – or wishes to trade – with Europe can ignore the ‘B’ word, Brexit, or overlook the considerable impact it has had on British business. 

So, six months on from the end of the UK-EU transition period and the two parties clinching a last-minute “historic” trade deal, what can we broadly say about how this has impacted on the fortunes of SMEs trading across borders? 

Small firms in the UK have experienced plenty of turbulence 

First, the not-so-good news; while the deal that the UK government did eventually strike with their European counterparts in late December was tariff-free, huge non-tariff barriers for British small firms have become apparent since the start of the year. 

Considerable paperwork has now arisen for UK exporters to the EU in relation to such matters as rules of origin, VAT and customs, in stark contrast to the apparently seamless trading experience many such firms previously enjoyed with the continent. Taxes and other costs have also gone very much up, and the effects are borne out in the statistics. 

According to official data, there was an almost 20% fall in UK exports to the EU in 2021’s first quarter, compared to the final three months of last year. There was also a more than one-fifth decline in goods travelling in the opposite direction, from the EU to the UK. 

Meanwhile, the UK’s Federation of Small Businesses (FSB) revealed in late March that almost a quarter (23%) of exporters had temporarily stopped sales to customers in the EU since the new trading rules took effect, with an additional 4% deciding to do so permanently.

In the words of the FSB’s head of International Affairs, James Sibley, to Deutsche Welle: “With the changes to VAT, rules of origin, customs paperwork, these are related to the UK leaving the customs union and single market, and us undergoing such a huge change to our trading relationship with the EU. These changes are not going away.” 

There may also, however, be opportunities in Brexit 

Any discussion of the impacts the UK’s departure from the EU has on international trade naturally must also take into account the situation for selling to and buying from non-EU states. With over two-thirds of FSB members trading with such territories, Sibley said the prospect of the UK brokering its own global trade agreements with new markets like Australia, New Zealand, Japan and the United States was an exciting prospect. 

One recent eye-catching move, for example, has been the UK’s application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), a trans-Pacific trading bloc of 11 countries. 

However, the UK’s trade with CPTPP members in 2019 only accounting for almost £111 billion – about six times less than the business the country conducts with the EU – also suggests that even CPTPP membership would not entirely mitigate commercial losses elsewhere for UK business. 

Whatever the challenges that await, TS Partners can be by your side 

With the ups and downs of Brexit so far having led some UK SMEs to set up or entrench presences in the EU, while others have doubled down on existing British customer bases, it’s clear that many challenges and opportunities continue to lie around the corner for UK firms.

If you are a small or medium-sized business on the lookout for a suitably qualified and capable accountant in Wellington or Plymouth, why not contact our professionals at TS Partners? We have a complete range of expert accounting solutions, and can be reached via phone or email.