Following a challenging year and almost five months of familiarisation with the post-Brexit arrangements, 40% of IoD members that trade with the EU expect their annual trade with the bloc to decreasecompared with pre-pandemic levels.
In the IoD survey of over 700 directors, of those businesses actively trading with the EU or who have temporarily suspended EU trading, 4 in 10 expect trade with the bloc in the year ahead to drop compared with pre-pandemic levels. Over one-third anticipated no change and 1 in 5 forecasted a pick-up.
The survey also found that of those businesses actively trading with the EU or who have temporarily suspended EU trading, 60% are still finding it challenging to adjust to new trading arrangements. Meanwhile 1 in 4 are not finding it overly challenging. Customs changes, and the new non-tariff barriers across goods and services trade were cited among the biggest obstacles.
Last week the Institute published a report, A Trade Policy Roadmap – Sweden, EU and the UK, setting out a roadmap for cooperation between the UK and EU on a positive long-term global trade agenda. It argues that there is an urgent need to stabilise relationships with the EU to support traders.
Commenting on the findings, IoD Chief Economist Tej Parikh said:
“It has been a tumultuous time for UK firms with EU customers and supply chains. The double whammy of the pandemic and the costs of adjusting to new trading arrangements is likely to dampen trade with the bloc over the coming year at least.
“Smaller traders have come through the past year with damaged balance sheets, and are currently finding it harder to justify the additional time and cost expended in exporting and importing across the channel. Many organisations are still getting their heads around customs changes and new non-tariff barriers. Snags in global supply chains and high shipping costs are also complicating things.
“The first quarter saw a number of firms treading water as pandemic restrictions lingered, now as the economy reopens many are evaluating whether it remains viable for them to trade with the EU.
“The government can help more traders by widening support through schemes such as the SME Brexit Support Fund, and by accelerating dialogue on services. With importers as well as exporters expecting decreased trading volumes ahead, there is clearly need for long-term cooperation on both sides of the Channel. Otherwise, this disruption risks permanently dissuading businesses from trading with the EU.”