On Dec. 31, 2020, the transition period for the United Kingdom (U.K.) to withdraw from the European Union (EU), otherwise known as „Brexit,” officially came to an end. This marked the end of a years-long process that was overseen by two different Prime Ministers, included several delays and extensions, and left the U.K. divided. What caused the Brexit and how that event impacted the UK? Please read the view from Glen Bullivant, experienced credit management consultant in the UK for many years.
For the purposes of talking about the UK and the EU, it is worth reminding ourselves that the United Kingdom is correctly designated as the United Kingdom of Great Britain and Northern Ireland and is made up of four nation states: England, Wales, Scotland and Northern Ireland. Scotland, Wales and Northern Ireland have devolved administrations – Scottish Parliament, Welsh Assembly and Northern Ireland Assembly, each with its own elected government and ministers, and supported by Westminster on major matters such as funding, defence, foreign policy, security and so on. They are all fundamental units of the United Kingdom (at least for the time being!). In addition there are three Crown Dependencies: the Bailiwick of Jersey, the Bailiwick of Guernsey (the Channel Islands), and the Isle of Man. They are not part of the UK, and therefore not members of the EU – it is as Crown Dependencies that they are to all intents and purposes “British”. Just for good measure, and in the context of EU membership, there is also the British Overseas Territory of Gibraltar, which is/was with the UK in the EU in effect.
In the 2016, Scotland and Northern Ireland voted substantially Remain, as did Gibraltar by a huge majority, though Wales was closer, and England largely Leave. It is worth bearing all this mind because the situation of Northern Ireland, and to a lesser extent Scotland, was a prime obstacle in reaching a UK-EU trade deal, and since 1 January, 2021 have proved to remain a great problem.
For as long as the UK and Ireland remained EU members, the border between Ireland and Northern Ireland was a line on the map, and essentially no different to that between, say, France and Italy. Ever since the 1920s there has been free movement of people (and largely goods and services) between Ireland and the UK and indeed Irish nationals resident in the UK could vote in UK elections. Even during the era of civil unrest (“the Troubles”), the border was largely open, and during the UK-EU trade negotiations, all sides wanted to avoid a “hard” border on the island of Ireland.
That border represents now the only “land” border between the UK and EU and to keep it open as before, the solution agreed was known as the Northern Ireland Protocol. There are many clauses in the Protocol but in principle the UK authorities apply EU Customs rules to goods entering Northern Ireland, resulting in new processes for businesses.
These include electronic import documentation, safety and security information for goods entering Northern Ireland from the UK. The Protocol has never been popular in Northern Ireland, objectors complaining that a “border” has in effect been created in the Irish Sea and since 1 January 2021 it has caused delays and confusion resulting in empty shelves in Belfast supermarkets. A short transition period had been agreed for businesses to acclimatise themselves with the new procedures, and in March, the UK Government increased that period by some months. The EU claimed this was illegal and will sue the UK, but to be honest the response of the UK Government was similar to that of Rhett Butler to Scarlett O’Hara – “Frankly, my dear, I don’t give a damn”!!!
During EU membership, Britain was a land bridge between continental Europe and Ireland with heavy traffic of goods through ports such as Dover to Holyhead and on to Dublin and Belfast. That has now reduced considerably and ferry companies have been opening up new routes linking France and Ireland directly. The down side of that is journey times doubled and freight costs increasing – the up side is of course two EU countries trading normally.
The huge delays forecast for Dover did not substantially materialise and by February some sense of normality had returned to cross Channel trade. However, delays still remain for food products in both directions and there is a sense in the UK that the 27 EU members are interpreting the same forms and rules in their own individual ways.
France in particular is seen as extremely pedantic, and a Netherlands border officer confiscated a truck driver’s ham sandwich lunchbox. Some documentation extends to 72 pages and in moves that credit managers will be familiar with in Letters of Credit, a misplaced comma or wrong spelling can trigger rejection. For many UK companies who have years of export experience, the EU is just another market – they have filled in forms for Australia or Argentina for years, so another form is just another form. It is those businesses who have only ever had a Home market where the major problems have arisen – for them, the EU was a Home market and now they find themselves struggling with Export. Origin is also a major issue – Marks & Spencer, for example, had a sweet product (“Percy Pig”) made in Germany, imported into the UK and re-distributed to stores in the UK and back in Europe. Because the product was not “UK Origin” (having been made in Germany, remember!), it fell foul of the EU’s Origin rules. Some major manufacturers were better prepared – Nissan knew that its electric cars made in Sunderland fell short of UK content to qualify for UK Origin so they are building a battery making plant alongside the Sunderland car plant – the finished car thus will qualify. Siemens, who already have a plant in Hull making blades for wind farm turbines, won a contract for new trains for London Underground Piccadilly Line – a total of 94 train sets at a cost of £1.5 billion – with options for a total of 250 trains for the Central, Waterloo & City, and Bakerloo Lines. They will be built mainly in the UK at a new factory under construction in Goole.
Of course, all the pre and post-Brexit ups and downs have been totally overshadowed by the Covid-19 pandemic and it is difficult to determine outcomes since the beginning of the year as being because of Brexit or because of Covid.
For example, UK exports to the EU fell by 41% in January, but this was partly due to teething problems with documentation, partly due to falls in demand in the pandemic, and partly due to stockpiling by businesses in advance of Brexit. There is no doubt, however, that UK-EU relations have been severely damaged by the Covid pandemic fallout when it comes to vaccines. The UK is far ahead of any EU country in its vaccination programme (currently – end March – over 50% of the UK adult population have received their first jabs) and the dreadful shambles of the EU vaccination procurement process has inflicted considerable damage. The President of the EU Commission caused anguish not just in London but also in Berlin and Paris on 29 January by her ill-judged invoking of the NI Protocol, hastily backing down, and then the constant barrage against AstraZeneca. Shortfalls in all vaccine delivery programmes were down to production problems (both Pfizer and AstraZeneca at their Belgian plants) rather than alleged “vaccine nationalism” and the result has been that UK-EU relations are now at their lowest level ever. Many “Remainers” in the UK would now vote “Leave” if they were asked again – one size does not fit all and for us all to prosper as we recover from the pandemic, it is the one major lesson to be learned.
* The views and opinions expressed herein are those of the author only
Author of the article:
A credit management consultant involved with credit for over 40 years, he has worked in various industries, including export. Glen has been a member of the CICM for more than 30 years and, in addition to being a past Chairman, also chairs its Technical Advisory Committee, serves on its Education Committee.