Business faces up to life post-Brexit

23rd of April 2020
Business faces up to life post-Brexit

The British government says it will “take the legitimate concerns” of business into negotiations aimed at brokering a free trade deal with the European Union. But what do businesses want post-Brexit? Hartley Milner seeks some answers.

Buoyed by his epic election victory in December, Prime Minister Boris Johnson has vowed to have a trade agreement with the EU signed off by the end of 2020, saying the possibility of not having a deal by then “simply will not happen”.

Many analysts in the UK argue that this time frame is too restrictive to obtain a viable settlement for either party, a view very much shared in Brussels. And Johnson himself stoked doubts when he seemingly rowed back on his earlier hard-line stance by refusing to rule out the prospect of a no-deal Brexit at the end of the year.

If a deal is not agreed and ratified by then, the UK faces the prospect of tariffs on exports to the EU, which is a major concern for Mike Cherry, chairman of the Federation of Small Businesses. He told ECJ: “Securing this agreement is critical to the many small businesses that trade with the EU single market and EU customs union. We want these businesses to have tariff and quota free access as well as seeing non-tariff barriers kept to a minimum. This can only be achieved if government and the business community work together.”

The EU is by far Britain’s largest trading partner, in 2018 taking 45 per cent of all its exports, worth €348 billion. Imports from the EU, however, accounted for 53 per cent of all UK imports (€427 billion), hence claims that the EU would be far from relaxed about the failure to strike a satisfactory settlement.

Whatever else they may demand from a deal, British businesses across all sectors will collectively be seeking assurances in key areas, including:

• Import and export of goods and services to and from EU countries, including VAT payments and, potentially, custom and excise duties

• Employment of EU citizens in the UK and employment of UK citizens in the EU

• Transport and logistics, fulfilment

• Supply chain disruption,eg from tariff and country-of-origin requirements

• Product safety and eco-compliance, eg packaging and labelling relating to EU licensing

• Copyright, trademarks and patents

• Data privacy and security, such as safeguards against cross-border cybercrime

• Environmental industrial standards, including emissions

• Mutual recognition of qualifications and relevant licences including audit, banking and insurance licences.

Each sector will have its own priorities. For an idea of what these may be for small exporters, ECJ turned to Jonathon Jones, managing director (trading) of Britain’s first commercial tea grower, Tregothnan. The business employs more than 50 people on a 100-acre plantation near Truro in Cornwall. Tregothnan’s biggest market is currently Asia, where it recently pulled off a ‘coals to Newcastle’ coup by selling its high-end products to the traditional home of tea, China. But Europe is increasingly an important market.

“The EU has an appetite for better quality teas and like the fact that we are Europe’s largest tea gardens,” Jones said. “We are unusual in that we pioneered the first tea grown in England and the media in Europe has covered the progress intensely. Typically, a German TV feature will create a spike in our website sales and lead to new stockists seeking to join our approved list. We expect trade this year to be up by five per cent, approximately 20 per cent of our exports.”

Special brew

Tregothnan has firmly grasped the Brexit nettle, even producing a fun brew called ‘Brexit’. Tea sales actually soared around the time of the 2016 EU referendum, which came as no surprise to Jones…“You have to ask yourself, when do people put the kettle on? It’s at times of uncertainty.”

He said media interviews he gave about the Brexit boost to sales arguably stimulated demand even further. “The exposure becomes self-reinforcing,” he explained. “If I’m out there talking about tea benefiting from uncertain times it creates more exposure to our products and hence more sales.”

However, he acknowledged that the business had been “negatively impacted” during the six months leading up to the 2019 Christmas general election. This was a period of greatly heightened anxiety over political dithering in agreeing a date for Britain’s formal exit from the EU. While Tregothnan’s tea sales remained sound, the business saw a slowdown in its rate of growth in the UK.

“We are a luxury brand; people do not need to drink our teas as there are cheaper brews available, so we accept we will always be an upgrade to people’s tea drinking choices,” Jones said. “For a while last year, it felt like the UK was sliding towards recession and this seemed to filter through to our customers. We sell to hotels, for example, and they were holding back from making purchasing decisions. Fortunately, any recessionary threat appears to have receded and I don’t think now that a recession will happen.”

So what is he wishing for post-Brexit? An end to relentless torrents of new regulation, for one thing. The British government has said there will be no alignment with EU regulations when the transition period expires at the end of 2020 and that firms will have to adjust to new rules. Jones said: “Too much regulation stifles businesses and distracts from doing business. I would like to see a more restrained approach to regulation in future and less of it where possible.”

Among policy reforms on his wish list is a more pro-countryside alternative to the EU’s common agricultural policy that would bring in more sustainable farming practices and place a stronger emphasis on countryside stewardship. He felt this could open up tremendous opportunities for smaller environment-based businesses like Tregothnan with its “teas and bees” (Tregothnan is also a honey producer, playing a part in helping combat the decline in bee populations).

A great believer in a free market economy led by consumer choice, Jones stressed the importance of tourism to regions such as Cornwall and warned against overregulating and overtaxing the means of people getting there, including air passenger services. All this, he pointed out, imposes extra costs upon businesses and, therefore, on consumers while not serving the interests of either.

“We are not looking for a reduction in the levels or quality of regulation, just a common sense approach where any new piece of regulation is not introduced until an existing one is removed, as happens in the US,” he said.

On EU trade talks, Jones echoed the thoughts of the FSB’s Mike Cherry, saying: “The government needs to negotiate a business-friendly deal as quickly as possible. And they need to bring in business people to help them do it because having politicians negotiating on behalf of businesses is not going to go well. Although we’re a small concern in terms of tea, we don’t want more complications; we want to keep trade simple and efficient, just like every other business wants. Politicians don’t seem to understand the everyday needs of business.”

Regarding tariffs, he said Tregothnan pays duty on tea to the US, Asia and a few other overseas markets, but consignments are relatively small, so the charges are not a problem. However, on the prospect of EU-imposed duties, he said: “Our friends in Europe send more goods to the UK than we send to them. I don’t see us introducing tariffs, so why should they? If it did happen, then as a business we will deal with it, and in terms of pricing our customers will know the score. But I really don’t see this happening.”

Tregothnan is “mainly self-sufficient” in terms of its labour needs, but on any future immigration controls Jones added: “The tea industry is a specialist sector and would welcome a moderate and sensible labour exchange. The tea culture of the Commonwealth complements this industry and a greater freedom of movement within the Commonwealth could be of enormous benefit to all.”

As for his preferred free trade model, Jones wanted a solution that draws on the most favourable aspects of all options – whether a Norway, Super Canada deal or other – while retaining existing mutually beneficial links with the EU. “Why would either side want to throw away the best of the good things we have worked out together?” he asked.

Ambitious plans

But what if negotiations fail and Britain defaults to World Trade Organisation rules? Jones admitted to wavering on this outcome, though he said: “I am not sure that it might not be the best thing.” Whatever the pros or cons, he thought trading under WTO terms would be “manageable”.

Deal or no deal, Tregothnan is pushing ahead with ambitious growth plans. Over the next few years, the business is looking to expand its Cornwall plantation by 50 per cent and build on its global presence, including opening a chain of teahouses in Europe, Asia and North America. Jones added: “The future is looking very bright for us…I have never felt so confident coming into a new decade.”


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