THE realities of Brexit are beginning to bite, and could result in losses of £9.5bn for Greater London, with £2.2bn coming from financial and professional services industries.
A report by law firm Irwin Mitchell and the Centre for Economics and Business Research (Cebr) valued exporting services to the EU at £23bn for London alone.
With no agreement in the TCA covering finance, Cebr suggests that for some regions and sectors, the direction of the “levelling” may not be “up”.
The report reveals projected impacts on all areas of the UK. The capital looks vulnerable in terms of services, but over a quarter of SMEs in Northern Ireland export to the EU — and EU exports are important for regional UK business turnover.
A mixed impact is expected across regions, with Yorkshire and the East of England to Scotland experiencing Brexit in different ways. Northern Ireland has one of the highest shares of SMEs exporting to the EU, while Scotland and Wales are among the lowest.
But Scotland has the second-highest average turnover generated by exporting to the EU, at £242,700 per business per year. With 96,000 SMEs, this suggests £3.8bn is generated by exports to Europe — revenues at risk as a result of Britain leaving the EU.
ONS figures show goods exports to the EU rose 8.6 percent in March, but the first quarter of 2021 was the first — since records began — where imports from non-EU countries were higher than those from the EU.
A London School of Economics study based on CBI data found 61 percent of firms are reporting Brexit difficulties, resulting in rising costs, higher prices and reduced competitiveness.
The Irwin Mitchell/Cebr report calls on the government to negotiate a smoother trading relationship with the EU. Firms hoping to return to a New Normal will have to factor-in the TCA agreement, and the knowledge that several grace periods for trade are soon due to end.
The grace period for Northern Ireland has been extended by the UK until October, something not accepted by the EU. From July 1, products of animal origin must enter the UK via designated border posts as customs controls are tightened. Grace periods on physical border checks and those surrounding Rules of Origin have been pushed back to January 2022.
Bruce Macmillan of Irwin Mitchell described the TCA agreement as “the ‘Canada-plus’ type arrangement” anticipated by many. “This report shows that UK goods not facing tariffs or quotas does not offset the issues, costs and delays that barriers and customs checks (non-tariff barriers) create.
“The end of free movement for people and services stands to impact many firms across the country, and an agreement with the EU on equivalence could still take time to resolve — even if there is the political desire to do so.
“Businesses need to be prepared for the emerging realities of our new relationship with the EU as it comes back into focus. Holding off decision-making and hoping for things to be as they were before is not a sensible strategy.”
But not all changes need to be major to meet political needs, Macmillan says, which offers some scope for lobbying.
“Many face a tougher trading environment and disruption puts billions of pounds at risk at a time when the economy remains fragile,” he said. “Regions like the East of England generate £2.3bn exporting services to the EU — money the regions will need to continue post-pandemic recovery.”