Brexit friction is hurting firms – Sunak must ‘strengthen EU relations’, top business body warns
Businesses have still not adapted to the impact of Brexit and the government must “strengthen relations with the EU” to relieve the strain on firms, the UK’s top business body has told the government.
In a letter to the chancellor Jeremy Hunt ahead of his budget on the 6th March, the British Chambers of Commerce (BCC) said that the Windsor Framework and the UK’s readmission to the EU’s Horizon programme showed the UK and EU “can work out compromises” and ministers should now look to ease the trading burden on companies.
“With these improved UK-EU relations, closer co-operation should be possible, through the partnership bodies with the EU, to look at how the [trade and co-operation agreement] is working in practice and can be improved,” the BCC’s director general Shevaun Haviland wrote.
In an interview with Morning Wire’s Bonds & Ballots series released today, Haviland added that businesses had still not adapted to trade barriers erected by Brexit and were struggling under current trading rules.
“We obviously knew it was going to be difficult at the beginning of a whole new set of rules,” Haviland said. “But we thought that businesses, once they’d implemented those, would sort of get used to it. But actually, that hasn’t happened.”
According to the BCC’s most recent trade survey in 2023, some 77 per cent of UK firms felt the post-Brexit Trade and Co-operation Agreement (TCA) was “not contributing to their business growth” and 56 per cent said they had “trouble in making the new trading arrangements work for their sales and export strategies”.
“It is crucial that we start making some of this easier for business,” Haviland added. “We want to see a bit more political will to make some changes – practical, realistic changes that will help smooth that transition.”
The call for stronger ties with the EU came amid a host of asks to Chancellor ahead of his March budget, including business rates reform and a review of the VAT tax threshold, which the BCC warned was choking off growth.
The BCC’s budget asks include:
- The government should match industry-led funding of £3m for planning qualifications to help plug the lack of local resources.
- Ministers should commit to fund business-led Local Skills Improvement Plans (LSIPs) beyond the current 2025 cut off point to at least 2028.
- The VAT registration review should be restarted with a view to removing the existing cliff edge.
- The Chancellor should introduce a new internationally competitive tax-free shopping scheme.
- Government should reform business rates to make it a tax that incentivises growth.
The TCA was a free trade agreement penned by the European Commission and UK government after Brexit and came into force in from 1st January 2021. The treaty is set to be reviewed in 2026.
However, the BCC’s fresh calls come ahead of a slew of expected changes in April that could inflict yet more friction on companies trading with the EU.
The first phase of the UK’s so-called Border Target Operating Model began on January 31st, with imports of plant and animal products from the EU now requiring certain health certificates.
However, the BCC has fired a warning shot to government over a new set of rules around physical checks on imports set to come in from April.
“Of more concern is a lack of clarity around physical checks of consignments, due to start in April, and the cost of new charges for overseas imports, to help pay for the system,” the BCC warned in January.
The government was contacted for comment.