What do we know and what we should await

That’s it, after almost a year of postponements and endless debates in the house of commons, the street, and the pubs, the UK is outside the European Union. It joined it 47 years ago and after the 2016 referendum, it seemed inevitable that this significant event would materialise.

So far, the planes are still landing at Heathrow, the Dover -Calais route is still bus, and the supermarket shelves are full of Spanish oranges. So, someone would ask, why all the fuss?

Now that the UK has left the EU, it immediately enters an 11-month transition period.

During the transition, the UK will continue to obey EU rules and pay money to the EU. Most things will stay the same but there will be some changes.

One thing is certain, until December 2020, nothing will change: the UK is still part of the customs union, goods are not checked at the border and the rules for products are still the same. But 11-month is a short period and we should ask also:

what would happen on the first of January 2021?

The answer is, we still don’t know and we will not get the info until a lot of negotiations between the UK and their counterparts, will happen. It is also likely that this transition period will be extended to allow for all agreements to take place.

But let us at least speculate: we focus on the trade that is the UK bound and that comes from the European Union.

Firstly, 30% of what the UK buys comes from other countries,

UK imports from the EU were £357 billion (52.7% of all UK imports i.e. £680 Billion). So taken as a bloc, the EU is the UK largest exporter. The US is the largest exporter country representing 10% of goods imported by the UK.

These figures include products and services.

UK trade with EU and non EU

The UK generally has a trade deficit with European countries, the biggest of these is with Germany (-£32 Billion)

UK-EU trade deficits in goods, 2018

The UK top imports from the EU are mainly road vehicles, pharmaceuticals, and machinery:

Top 10 UK goods imports from the EU, 2018

How about the UK Food Imports?

The Uk imports half of the food it consumes, and the trend is continuing as the UK self-sufficiency has been declining for the last 30 years.

Origins of food consumed in the UK in 2016

So, Brexit will not only impact the food imported from the EU but also the 20% or so coming outside the EU. The reason is that these are currently under trade agreements between the EU as a whole and the individual countries. The UK needs new trade agreements to substitute the ones it had a member of the EU.

In total the UK imports as much food as cars £46 Billion) and this is the breakdown:

UK trade in different food groups, 2017

If an agreement cannot be negotiated, Brexit is likely to result in an average tariff on food imports of 22%. While this would not equate to a 22% increase in food prices for consumers, there can be no doubt that prices paid at the checkout would rise.

To counteract this, the Government could cut tariffs on all food imports. But this would pose a serious risk of undermining UK food producers who would be unable to compete.

Of course, tariffs change is not the only changing and unknown factor, others are:

  • Checks and resulting delays
  • Product and packaging new rules
  • Customs procedure
  • How the logistics industry will react to the changes, will we see some actors withdrawing?
  • What is the timeline with the rest of the world and how about the quota sharing? Would the EU with a certain quota to say Australia, maintain the same quota when the UK is out of the customs union? And how much is allocated to the UK post Brexit?

All this will be clearer in 2021, Prowexx will give you the right guidance, whether you are a new supplier or one already active in the UK .

Prowexx will also help UK buyers source products within the new paradigm of prices, quality, and regulation. It is imperative that they have access to a broader product database.The best way to do that is to go digital as otherwise, time is running out.