Time has almost run out to roll over EU trade deals with other countries that cover around £80bn of UK imports and exports, leaving businesses guessing as to where they will stand when the Brexit transition period ends on 1 January.
Companies that trade with Canada, Mexico, Turkey and Singapore, among others, face quotas and higher tariffs that may make products more expensive for consumers and make UK exports less competitive.
Some company directors fear that their businesses will not be able to absorb the extra costs.
‘It might be too late for us’
Best Textile, based in Liverpool, imports towels, bathrobes, blankets and bedding sets, T-shirts, hoodies and socks, among other products from a manufacturing hub in Turkey. Many of these items will attract tariffs of 12 per cent if a deal isn’t agreed.
All of Best Textile’s imports into the UK are made bespoke to order and managing director Ugur Inanc worries that the business may not be viable unless current zero-tariff access continues.
“Unfortunately, we don’t have information about post-Brexit trade terms which puts us in difficult situation,” he says.
“From the beginning of the production to delivery into the UK takes six weeks. If new customs tariffs are added during this period, we cannot ask to our customers to cover it.
“We will have to pay any extra cost that didn’t exist at the beginning of our agreements with our customers. Even when we try to explain our current situation to customers, a new trade agreement with Turkey may cause a problem.
“We expect the UK government to continue the current trade deal with Turkey, but it is only our expectation, and this is best scenario for us.
“If a new trade deal means tariffs are introduced, we need to find the solution to save our business. We must be informed about post-Brexit deals in advance otherwise it might be too late for us.”
‘It’s a critical period’
Chris Gaunt chairs the British Chamber of Commerce in Turkey, having worked in the country for almost two decades. He is hopeful that a last-minute deal with the EU will be done.
That would mean trade relations with Turkey remain the same. If a deal isn’t done, bilateral negotiations with Turkey cannot start until the transition period is over.
“It is a critical period just now to get an agreement in place,” says Gaunt.
“No deal would mean tariffs. It would then be for Turkish exporters to look at how they deal with that with their customers in the UK. It’s not going to be a straightforward acceptance of higher costs by UK companies.
An average 12 per cent tariff on textiles, for example, is “not insurmountable” he says, but it’s still, going to increase the cost of Turkish goods entering the UK.
He points to other aspects that may mitigate some of the damage.
“The increase in tariffs would not necessarily be a major deal breaker in my opinion. There are savings in reduced transports costs and lead times, for example.
“We are also seeing some interest from companies looking at moving their supply chains from southeast Asia to closer to the UK, and Turkey is a country that could satisfy that. That may be another attraction.”
But he hopes a long history of trade between the two nations, and a willingness on both sides to do a deal, will count for something. If there’s no deal with the EU, he envisages a bilateral agreement being signed in around six months.
“We are second oldest British chamber of commerce overseas, established in 1887. That says a lot about the trading relationship going back to Ottoman times.
“We’re planning for what we expect, and we expect the UK to do a last-minute deal with the EU. That’s in everybody’s interests and that would put everyone at ease.”
Some businesses will be ‘really badly hit’
David Pearson heads up the international trade team for the East Midlands Chamber of Commerce. Part of the chamber’s work is to act as a customs broker, processing paperwork that will be required on imports after the transition period ends.
He fears that, while some firms are prepared and others are belatedly understanding the requirements they will face, others may be in for a shock.
“The continuity agreements may only cover about 6 per cent of our exports, but equally that’s about £40bn.
“We can’t treat every business the same. There are some that will be really badly hit if these deals are not in place.
“If you’re a business that exports several million pounds to countries such as Canada, Turkey and, to a lesser extent Mexico, it makes a big difference to you.
“It would be great if we could get them finalised. If they’re not, we want the government to be honest and say ‘we’re not going to get these deals done in time, therefore this will be the impact on your business’.
“I suspect that’s not going to happen. They will keep everyone on tenterhooks right until the last minute and then say they’ve not managed it.”
“Businesses are starting to come round to what they need to do on 1 January. A free trade agreement, which is what the UK is aiming for, will not affect the need to have a customs declaration at the border. There is a misconception there among some firms.
“It’s not an insignificant burden.”
