(Bloomberg) -- UK businesses are pushing for Prime Minister Keir Starmer to agree a new deal with the European Union that reduces complexity for exporters, as he seeks to deliver on a promise to “reset” relations with the bloc.
Changes to the post-Brexit relationship with the EU “cannot come soon enough” for firms who are struggling under the burden of increased paperwork and regulations, according to British Chambers of Commerce Director-General Shevaun Haviland. The BCC late Sunday published a survey of more than 1,100 businesses that found only 15% think Britain’s existing deal helps them grow sales in the bloc.
“The structural trade problems created by Brexit have not eased and, in many respects, they are getting worse as EU and UK rules and regulations head in different directions,” Haviland said in a statement. “Firms are suffocating under a blanket of rising costs and improving our trading relationship with the EU could provide the growth needed to transform the dour outlook many are facing.”
The BCC’s call highlights the challenge for Starmer as he seeks to make good on an election campaign promise to deliver enduring economic growth. Businesses have repeatedly said exports will be vital to achieving that, and improvements to trade with the EU — which remains the UK’s biggest trading partner — are a key demand. Easing the flow of exports to the continent could make a “big difference” to Britain’s growth prospects, Haviland said.
But securing that isn’t an easy task, with the bloc likely to want a youth mobility deal in return for any agreement on food and agricultural standards — something Starmer’s own advisers are wary of amid fears it might be perceived as a return to the freedom of movement that contributed to the vote for Brexit in the first place.
The BCC’s survey found that 46% of businesses want the government to make it easier for UK staff to work in the EU and 77% were unaware of new safety and security regulations affecting EU imports due to come into force at the end of next month. Some 45% cited customs procedures and documentation among the biggest barriers to trade, 39% named export documentation and 36% pointed to regulations and standards.
In its report, which has been sent to the government, the BCC suggested five measures Starmer should to push for in his planned EU reset:
- Eliminating or reducing the complexity of exporting food for small and medium-sized enterprises
- Creating a youth mobility program covering school visits and exchanges and a time-limited ability for young people to travel for work
- New arrangements to raise awareness about forthcoming regulatory changes
- Securing a supplementary deal like Norway’s so smaller businesses don’t need a representative in the EU for VAT purposes
- Permission for UK firms’ staff to travel for longer and work in Europe, and vice versa, and providing mutual recognition of qualifications
The commercial relationship is governed by the Trade and Cooperation Agreement, which was sealed on Christmas Eve in 2020 and was designed to allow tariff-free trade. But non-tariff barriers have sprung up including reams of paperwork, conformity assessments for exporters and limits to business mobility. Marks & Spencer Plc Chairman Archie Norman said earlier this month that the retailer was having to rent a warehouse in Ireland to store documents needed to take food across the border.
Recent research from the Centre for Economic Performance at London School of Economics estimated that the UK had missed out on £27 billion ($34 billion) of goods exports since the implementation of the agreement.
The separate Windsor Framework, agreed in early 2023, was designed to govern Northern Ireland’s relationship with the EU and the rest of the UK, and keeps the region aligned with the bloc on goods regulations.
But that agreement is now being tested as the region’s Democratic Unionist Party, which wants to ensure Northern Ireland remains part of the UK, has threatened to use a mechanism known as the so-called Stormont Brake for the first time. That would give the Northern Ireland assembly the power to object to certain changes to EU rules that apply in the region, essentially allowing the UK to veto the application of that rule. The EU is then permitted to take unspecified measures to protect its internal market. If the Stormont Brake is activated repeatedly, that could cause a further headache for Starmer as he enters negotiations with the EU.
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