Brexit three months in - firms battle rising costs and export nightmare but it isn't all doom and gloom
RISING costs for exports, new paperwork and delays to shipments are just some of the problems Brexit has caused for businesses across the Portsmouth area.
However, Brexit has not been without its benefits, as many firms are also reporting strong sales and stronger relationships with countries outside the EU.
Now, as firms are beginning to get to grips with the new rules three months after they were introduced, calls are being made for the system to be streamlined and for processes to be made smoother, in a bid to ease transactions with Europe and boost the economy.
Dr David Pool runs FishScience Ltd in Shirrell Heath. His business markets and sells a range of foods for aquarium and pond fish which use insect meal as a key ingredient.
His business started in 2013 and now supplies products to over 300 stores throughout the UK as well as to distributors in EU countries, New Zealand, South Africa and Dubai.
His products are manufactured and packaged in the Czech Republic.
He said that while sales have boomed, thanks to an increase in pet ownership throughout lockdown, he has struggled with exporting to Europe.
He said: ‘Our sales have increased by over a third in the last 12 months. I’ve had no issues with importing my products into the UK and have maintained good stocks.
‘Unfortunately exporting FishScience products to EU countries has proved to be very problematic. The changed paperwork requirements have resulted in delays in delivery times as customs clearance personnel get used to the new systems.
‘I have one shipment to a customer in Spain which was sent January 13 and has still not been delivered. Shipments to Ireland are also difficult and uneconomical, so I expect to lose a number of my Irish customers.’
Dr Pool said that health certifications, set to come in later this year, will further complicate issues.
He said: ‘This will make smaller shipments uneconomical and more complicated. There are, of course, ways around this such as appointing distributors in other European countries, but this isn’t the individual, customer focused business plan that has been successful in the UK and was planned for future export plans.
‘Fortunately the FishScience business is focused on the UK at present so the export issues will not be too problematic but there are many businesses who have a significant part of their sales in Europe that are affected much more severely.’
The situation is similar for many other products across all sectors.
Keith Skinner, who runs Varese Secure in Segensworth, said that his company had experienced delays and incurred extra costs shipping parts to Europe - and he called for the system to become similar to how it is currently dealing with America.
His firm, which makes degaussers, which destroy hard drives, has just seen its best ever month in its 10 year history, however he feels the situation with Europe is holding it back.
He said: ‘It has meant that we have had to learn a lot of new things. You need to get your paperwork properly done before anything is dispatched.
‘It has almost killed off the small transactions of spare parts to Europe. Something that would have cost €25 is now costing €90. My customers in Europe are finding that it is not easy for them. We are both losing out.
‘We need to make sure that everyone understands the new rules and receives as much help as possible, not just us but our customers in Europe.
‘We need to be working together to make it a smooth process. Importing from America is easy, the parts arrive overnight, that part of our business is exceptionally easy. That’s how I would like to see us moving forward with our relationship with Europe.’
He said that some of the delays have seen parts held back for three weeks.
He added: ‘Originally I was against Brexit, but now I can see the benefits and I think it was a good move but we need to stop and work through the issues a bit better, even if it was as simple as having pre-printed paperwork available.’
Delays have also hit Hampshire-based BSA Tuberunner, which makes parts for heat exchangers, boilers, condensers and other refinery equipment.
Director Simon Wilson said: ‘The biggest issue we have seen is around delays in getting goods cleared through customs.
‘This is most noticeable when exporting and I feel that the Europeans were not as well prepared as us.
‘It is also interesting to see that the way the rules are being applied and information being requested does vary slightly from country to country.
‘We had expected a more uniform approach.
‘As the deal was signed at the 11th hour it did not really give enough time for all to understand and make full preparations.’
Another firm reporting exceptional figures but also struggling with the weight of Brexit is Penta Precision, a Portsmouth-based CNC machining specialist.
It has been preparing for Brexit and economic shocks for four years, using a business operating system – based on 18 high performance companies in the US – to overcome a number of challenges to post a record year.
Its order book is 50 per cent higher than this time 12 months ago and is currently recruiting for two new technical staff while putting the finishing touches to a relocation that will double the size of its factory.
Mark Walker, director at Penta Precision, said: ‘Business is good, but it hasn’t been without its Brexit challenges.
‘We only have one small customer in the EU and just last week we took delivery of components they free issue as part of the contract.
‘The order has been delayed by two months with items stuck in customs and we have had to pay a £993 charge to get them released. Prior to Brexit there were no charges and goods flowed freely.
‘Other effects we are seeing include certain input raw material prices rising by six per cent due to tariff charges and tooling/small consumables taking three to seven days to arrive. Again, this is due to customs clearance as many items in our sector are sourced from the EU.’
His view echoes those of Fishscience and Varese Secure, that while Brexit has proved complicated to adjust to, that the benefits outweigh the negatives.
He said: ‘Despite these problems, we have a long-term view on how Brexit will play out. We feel the increased friction will drag on the economy and make cross border trade more challenging, resulting in the pound remaining weaker.
‘As a business, we’re focussed on technical, scientific niche product manufacture and our gut tells us weaker Sterling will make our customers’ products better value on the world market. So, as a self-confessed ‘re-moaner’, our customers may benefit from being more competitive and therefore Penta will prosper.’
Dan Heelan, who runs Heelan Associates Ltd, an accountants in Waterlooville, said that the problem was particularly hitting small start-ups and putting them off selling to Europe.
He said: ‘For clients who are trying to build products to be sold across the world, it's a nightmare right now, and I am surprised it’s not being talked about more. It’s a massive barrier.
‘When we were in the EU we benefited from ‘distance selling thresholds’. What that meant is that small businesses could start up, sell something on say etsy, ebay, amazon or direct from their website, to someone in Europe.
‘The client paid on the site, taxes all dealt with here in the UK if relevant. They could post out, and it would arrive in a few days. Those distance thresholds have gone. What that means now is that the small business who ships to Europe will find if they do nothing, in most cases their customer will get stung for import VAT and Duty.
‘We have a beauty brand and a retro computer product manufacturer, both small businesses, having massive issues with this. The duties and tax the customer pays is around a third of the cost of the product.
‘They are left in a situation where they may have to register in another country for VAT to solve the VAT issue for their customers, which is a massive hassle, costly and an admin nightmare.
‘On top of this they are then having to wait weeks for the product to actually arrive as it’s hitting border controls.
‘The upshot of this is we have clients actively considering just not selling to the EU, restricting their market massively. For entrepreneurs wanting to grow this is a horrible situation.’
Ross McNally, Hampshire Chamber chief executive and executive chairman, said that long-term solutions were needed to ease exports.
He said: ‘It’s true that exports to the EU have taken a hit since January and it is up to the government to put in long-term solutions to keep goods moving.
‘Thankfully, business decision makers tend to be pragmatic, sensible people and they will continue to work through the various issues.
‘They will aim to overcome the challenges of new customs requirements for the benefit of themselves and their customers, and to support their supply chains. At the same time, they will want to grasp any opportunities from the UK now being able to conclude free trade agreements with non-EU countries on its own.
‘We urge any Hampshire exporter or importer, in whatever sector, to take advantage of the range of help we offer so they can navigate these early months of Brexit and continue to trade successfully overseas.’
Other firms are looking on the brighter side, and are hoping that the long-term benefits of Brexit will pay dividends.
One business hoping to prosper from Brexit is Fareham manufacturing firm Barnbrook Systems Ltd.
The 45-strong firm is a designer, developer and manufacturer of electronic and electro-mechanical components for the aerospace, defence, marine, rail, fire and commercial industries.
Barnbrook exports to customers in the European Union and worldwide. They include Italian aviation giant Leonardo and French aerospace and defence firm Safran. Other clients include Hindustan Aeronautics Ltd for the Indian Air Force and Babcock for the MoD.
Managing director Tony Barnett, who founded Barnbrook Systems in 1978, said: ‘Brexit has become a fact of life.
‘It has been in the background for the past three or four years so we have had a chance to prepare but it has now become reality over the past three months.
‘Although we have clients in the European Union, we have not been impacted as severely as many other businesses appear to have been.
‘Business has remained steady and to some extent we have been insulated against the worst effects because of the nature of our business.
‘Our products are not perishable although they are safety critical so logistics and timely deliveries remain incredibly important.
‘Most of our own supply chain is based locally, so we are not exposed to the vagaries of import delays and customs issues which have affected some parts of the economy.
‘We also have a strong customer base in the UK, including the defence, rail and aerospace sectors, which continue to support the business.’
Tony, who is a director of the Farnborough Aerospace Consortium trade group, added: ‘More generally, the impact of Covid has muddied the waters and made it harder to gauge the direct impact of Brexit.
‘Looking ahead, Brexit is an opportunity to be positive about the UK and promote trade outside of the EU.
‘Our company already exports to customers across the world. We have strong links with India where business is growing and we will be seeking to expand even further in international trade.
‘Brexit gives an opportunity to trade on the excellent reputation of Great Britain and really take advantage of growing international markets.’
Robin Simpson, from the Manufacturing Growth Programme in the Solent region, said that there are reasons to stay positive.
He said: ‘Whilst our recent barometer survey of the manufacturing sector highlights some valid concerns about the UK’s departure from the European Union, there are a number of promising findings from those businesses based in the south east.
‘For example, almost a quarter (24 per cent) of respondents anticipate that their sales will increase due to the businesses that they supply bringing work back to the UK; referred to as ‘reshoring’. Similarly, almost a third (29 per cent) of manufacturers expect their employee numbers to increase over the next six months.’
In his role providing free guidance and financial assistance to independent manufacturers based in Portsmouth and Hampshire, Robin has seen first-hand the effects of the pandemic and the shift in the UK’s trading position with Europe.
‘The last 12 months has brought the toughest challenges that I have ever seen businesses have to face,’ he said.
‘The way in which firms, like Penta Precision and others in the manufacturing sector, have risen to these challenges has been nothing less than tremendous.’