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‘Set up in EU, or set up UK wholesale network’ to avoid trade deal woes

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Worst case scenario. Picture: UKNip
Worst case scenario. Picture: UKNip

Businesses are reporting increased disruption and additional costs as they attempt to trade with the EU – and it could mean the price of a bottle of wine goes up.

Customs bottlenecks mean that Hal Wilson, of Cambridge Wines, cannot get 20,000 bottles of wine to Cambridge because they are stuck at the border.

Hal said it was “like travelling back 30 years in time” as he was “forced to use a vintage paper-based system”.

Daniel Zeichner, Cambridge’s MP demanded action in the House of Commons on Monday (January 25) and challenged the government to “sort out the mess they have created” as they discuss the detailed legislation for wine importers in the Commons.

Wine lovers have been warned they face paying a “Brexit tax” of up to £1.50 more for bottles of wine – and sparkling wines – coming from France, Italy and Spain, as certification processes and VAT taxes kick in.

Horizon Retail Marketing Solutions in Ely tweeted that the company had been “advised by government to relocate to the EU to avoid Brexit red tape (laying off UK staff and rehiring in the Netherlands)”.

National newspapers also reported the advice, noting that UK companies were advised to establish subsidiaries in the EU bloc by both the Department of International Trade and the Department for Environment, Food and Rural Affairs after being hit by extra charges, taxes and paperwork.

“We know there are many companies who have set up in Europe to continue to trade in the way they used to,” said John Bridge, chief executive of Cambridgeshire Chamber of Commerce. “One has set up in southern Ireland, others in the Netherlands and France.

John Bridge, chief executive of the Cambridgeshire Chamber of Commerce. Picture: Keith Heppell
John Bridge, chief executive of the Cambridgeshire Chamber of Commerce. Picture: Keith Heppell

“People didn’t understand the rules of origin and how they operate: we ran lots of events in the run-up, saying, ‘You need to prepare now, deal or no deal’, but people failed to comprehend, so now we’re working with businesses to face the challenges.”

Mr Bridge says the situation is affecting small businesses and traders the most – and will eventually result in fulfilment centres being set up in the UK which allow smaller traders to obtain what they need without the expensive and time-consuming red tape snarling up their business models.

“We’ve been helping a Cambridge market stallholder who sells cheese and he can’t go to France and pick up special deals in the way he used to because he has to do all the paperwork in advance, so now he can’t look at what he’s buying,” says Mr Bridge.

“There will be, we think, a development of wholesalers who do the imports into the UK so small companies can buy direct from them without having to go through the red tape, because the problems of registering and VAT payments mean it isn’t worth the time where there’s only a small amount of work involved.”

The other options are opening fulfilment centres in the EU, or setting up a EU company to trade from the EU into the UK.

“They would be controlled by the UK but would be local entities,” says Mr Bridge of the prospect of UK businesses setting up subsidiaries in the bloc. Such facilities would be run by local, not UK-based, personnel.

Dover Eastern Docks, quieter at the moment, after the chaos over the new year
Dover Eastern Docks, quieter at the moment, after the chaos over the new year

“I’m not saying you have to go to Europe but people need to understand what the cost implications are.

“The rules of origin specify what percentage of a product has to be sourced from the EU. When we moved out of the EU there has to be a review of the agreement.

“Say a French company was selling fashion clothing into the UK, and the clothes came from the Far East. They would pay tariffs in France.

“Previously they could send them straight on to the UK, but they are suddenly subject to more tariffs and VAT because the point of origin was not the EU. This is why people are finding they’ve got problems.”

There have been reports by analysts that the UK/EU trade deal may be “unstable” and require renegotiation but Mr Bridge believes there is now little leeway.

“The key thing is how long it took to get to an agreement that was finalised at the last minute,” he said, “and I cannot see the EU acquiescing to change it. I think common sense will prevail because yes, we may have a problem here, but they have a problem there – no one wants to be disadvantaged, so it’s about looking at the processes we’ve got.”

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