One in four small UK exporters halt EU sales

New research this month by the UK’s Federation of Small Businesses (FSB) shows that UK-EU export problems have persisted into March and are “in danger of becoming permanent”.

Almost one quarter of small UK exporters have temporarily halted sales to European union   (EU) customers and a further 4% have already decided to stop selling into the bloc permanently, while more than one in ten (11%) exporters are considering halting sales to Europe permanently, the new survey has found.

The survey this month of more than 1,400 small UK firms published yesterday by the FSB indicates that 23% of UK SME exporters have suspended export sales to the EU and a further 4% have already decided to stop selling into the bloc permanently after new trading rules took affect at the start of this year.

The findings follow research from four of the UK’s other main business groups (BCC, CBI, IoD, Make UK) that highlight major post-Brexit problems being experienced by a significant number of UK export businesses, the FSB highlighted. But the FSB survey is the most recent data and indicates that the problems have persisted, with the FSB warning that “the problems are in danger of becoming permanent, systemic ones”. 

It highlighted that alongside the one in ten (11%) exporters that are considering halting sales to Europe permanently, the same proportion have established, or are considering establishing, a presence within an EU country to ease their exporting processes. And a similar number (9%) are thinking about securing, or are already using, warehousing space in the EU or Northern Ireland (NI) for the same purpose.

Small importers are also hard hit by new paperwork, although fewer than one in five have temporarily suspended purchases from the EU (17%), and a smaller proportion are using EU or NI warehousing space (6%), the survey found.  

Meanwhile, the majority (70%) of importers and/or exporters report that they have suffered shipment delays when moving goods around the EU in recent weeks. One in three (32%) have lost goods in transit, and an even greater proportion (34%) have had goods held indefinitely at EU border crossings. Of those that have experienced delays, a third (36%) have suffered hold-ups that lasted more than two weeks.     

More than half (55%) of importers and/or exporters have sought professional advice to help them with new paperwork pertaining to EU business activity, often to assist management of customs declarations, rules of origin paperwork and altered value added tax (VAT) obligations.

FSB national chairman Mike Cherry said: “At a moment when small firms are doing all we can to return to growth and get our economy firing on all cylinders again, those that do business internationally are being hit with some incredibly demanding, unfamiliar paperwork.

“Three months on from the end of the transition period, what we hoped would prove to be teething problems are in danger of becoming permanent, systemic ones. While larger firms have the resources and bandwidth to overcome them regardless, smaller traders are struggling, and considering whether exports are worth the effort anymore.  

“Our exporters tend to be among our most innovative and profitable small businesses, so it’s troubling to see them bearing the brunt of changes. The SME Brexit Support Fund marks a much-needed intervention, and we’d encourage all those struggling to manage new requirements to apply, and for the Government to dedicate further resources if the fund is exhausted, rather than turning down applications. 

“Unless more is done to ease the admin burden on those that do business overseas, and increase access to markets outside the EU, it will weigh heavy on our efforts to recover from the most severe downturn on record.” 

Following the findings, FSB is urging the UK government to:

• Increase the threshold at which tariffs and taxes for imports and exports kick-in to £1,000.
• Closely monitor the roll-out of the SME Brexit Support Fund, ensuring small businesses are aware that they can apply for funding to access a range of trading advice, training and technology, and not exclusively that relating to customs and intermediaries.
• Strike ambitious new free trade agreements (FTA), which include dedicated small business chapters, with fast-growing economies around the world, including the US.

No one within the UK government had responded to questions from Lloyd’s Loading List about the findings at the time of writing.

As the first full quarter of post-transition trading comes to a close on Wednesday, FSB highlighted that this week also marks two years since the original Brexit date that firms were told to prepare for in 2019.  

FSB surveyed 1,483 businesses between 1 and 15 March 2021 of which 207 were importers and/or exporters. The findings follow research from each of the UK’s other four main business groups:

• A British Chambers of Commerce trade survey from January 2021 showed that 49% of UK exporters report difficulties in adapting to changes in the trade or movement of goods.
• A CBI trade survey from February 2021 showed that 68% of manufacturers have experienced delays at borders with 60% also reporting additional customs costs and admin.
• An IoD trade survey from March 2021 showed that since 31 December, almost 20% of directors whose organisations had previously traded with the EU, have stopped.
• A Make UK survey from March 2021 showed that 74% of UK manufacturers have encountered delays at ports this year, with over half facing increased costs and a third losing revenue.