Whatever your views on Brexit, there is no getting away from the effect it has had on UK businesses’ ability to export to Europe.
British businesses have significantly greater challenges when trying to sell their goods to European customers and many have simply given up trying. There are new charges, bureaucracy and the increased potential for delays which makes it very difficult for UK products to be competitive against what is available elsewhere within the EU.
European companies will look for alternative suppliers as importing from the UK is just considered too much of a hassle.
Firstly, this means that if your business has stopped exporting then you’re certainly not alone. Secondly, there is now so much potential for sales into Europe if you can work around the issues in a way that your competitors can’t.
Over the next few weeks, we will be posting articles on different ways that you can overcome the challenges that Brexit has presented us with.
The effect on British exports
The Economic & Social Research Institute (ESRI) reported that exports from the UK to EU countries had reduced by 16% relative to expectations in 2022.
You can never make exporting exactly the same as when the United Kingdom was in the European Union but there are robust solutions that can get your products competitive and selling again.
Exporting will never be the same as before Brexit but there are robust solutions that can get your products competitive and selling again.
Customs costs and VAT makes UK goods complicated and expensive
Before Brexit, you could sell to customers in Europe without having to pay any customs, VAT or duty charges on exports. Your goods could be sold without any extra effort on the part of the customer, but Brexit has made this much harder.
Not only were there now the standard charges applicable for goods crossing international borders but also the administration, which has become vastly more complex. For most this meant that the EU customers had to source their own customs clearance provider and then were liable for the costs.
Even if the UK business made their products deliberately cheaper, they could not make them an attractive prospect when compared with EU companies which were still simple to buy.
What you are looking for is a DDP or Delivered Duty Paid incoterm solution. This means that when you transport goods the company that’s shipping is responsible for the carriage costs, duty and VAT until it is delivered. The buyer or consignee has nothing to do but receive the goods and needs no extra training for their staff.
So ever since Brexit happened, we all started looking for a way to take the hassle out of buying UK goods and there are ways for you to do this.
Working around import VAT
You can approach a Freight Forwarder or Customs specialist yourself who can help your goods enter the EU using either a local or a global VAT number.
For example, in the Netherlands, this would be under Article 23 and could either be a general or limited fiscal representation. In France, it would be Regime 40 or 42.
You would choose which one of those you needed based on which country that your customer was based. Are they based in the EU country that you are importing to from the UK or are you transiting that country to deliver to a customer in another country?
You will need to get set up with a European VAT number before you can export, but applications can take months and can be tricky to set up. To get your goods moving in the short term you could use a global VAT number through a customs business or freight forwarder.
It is often possible to have deferred VAT repayment set up so that your business can reclaim the costs back. A better solution is to use a partner that can arrange reverse charging so that the VAT comes back straight away. That way you won’t negatively affect your working capital.
Tackling the cost of customs
You can’t avoid customs charges, but you can absorb the costs yourself. The trick is to minimize the costs to your business and therefore your customers.
One way to bring down the costs of transportation is to consolidate your goods together onto one larger lorry rather than using individual vans. This is known as a groupage load. The consignment can then be moved in one load to a warehouse in Europe where it is then distributed to your various customers on smaller vehicles which have a much shorter journey.
The problem comes if you have multiple commercial invoices as that means that there will be multiple customs charges. The way around this is to have one commercial invoice for the whole consolidated load which then needs to be customs cleared all at once. Then you can transport them to a warehouse once the goods are in free circulation within the EU.
You will need to get set up with a customs company or find a freight forwarder that can get you set up and advise the best route and which business to use. Each customs agent will have their own strengths and weaknesses and you should choose carefully depending on the route and the goods being transported.
You will also need an Economic Operators Registration and Identification (EORI) number for both your company and the one you are selling to. An EORI number is different from the VAT number and is needed for customs. You can register for this with HRMC.
Keep an eye out for our next article in the series dealing with exporting in a post Brexit world. We will be talking about how to reduce long transit times and border stoppages.
Every UK business will have different challenges when it comes to exporting. If you would like to speak with people who have experience in how to deal with Brexit complexities then please get in touch
