For many Britons Brexit was a one-time event involving a vote in the 2016 referendum, but for UK exporters such as Brandauer, a Birmingham-based specialist component maker, trading outside the EU has been a journey. continuous adaptation.
From managing Germany’s value added tax to mastering the intricacies of six-digit European customs codes, Brandauer managing director Rowan Crozier says his small business has managed to retain European customers with components precision tools used in a wide range of industries including automotive, construction and pharmaceuticals.
But Crozier is aware that in many ways Brandaeur’s Brexit journey is just beginning as the EU introduces rules on border carbon taxes, plastic waste management and supply chain monitoring. supply.
This means that EU rules are starting to diverge from their UK equivalents. “The divergence is a permanent headache,” he said.
Trade and industry experts warn the growing volume of future EU regulations is leading to ‘Brexit 2.0’ as the 27-nation bloc introduces rules that even when mirrored by the UK , create new barriers to trade.
“We receive new [EU] legislation all the time,” said Fergus McReynolds, director of EU affairs at manufacturers trade body Make UK. “So as the UK remains static, you have to treat the EU and the UK as two completely different markets from a regulatory point of view.”
McReynolds said Make UK members were focusing on three main EU regulations: the bloc’s upcoming border carbon tax, the implementation of plastic packaging rules and the draft duty to care laws. supply chain due diligence being discussed by Member States.
The introduction of the EU’s carbon border adjustment mechanism is likely to have a significant effect on companies trading with the bloc, according to George Riddell, director of trade strategy at consultancy EY, which helps British companies exporting to the EU to prepare for the measure. .
From October this year, companies in the EU will have to compile reports on carbon emissions linked to certain imported products, including steel, aluminum and fertilisers, with companies having to buy certificates to cover emissions integrated into products from 2026.
The paperwork and costs associated with the carbon tax will land on UK businesses that supply components to European companies covered by the regulation – which affects products as prosaic as nuts and bolts. As a result, some of these UK companies will be more difficult for EU companies to negotiate.
“From 2026, cost pressures will factor into your choice of suppliers,” Riddell said.
The UK government is consulting industry on introducing a UK version of the EU border carbon tax, but with no legally binding link between the two schemes, domestic companies will still have to demonstrate compliance with the bloc’s rules, said William Bain, head of trade policy at the UK Chambers of Commerce.
“[The EU carbon border adjustment mechanism]packaging legislation, supply chain legislation are becoming an issue for UK businesses on how best to order compliance without incurring huge additional costs,” he added.
British MPs were warned at a meeting in Brussels this month that they must follow EU law to help British businesses respond.
Nathalie Loiseau, a senior French MEP who co-chairs the UK-EU parliamentary partnership assembly, said the two sides had “started to diverge”.
“There is a lot of legislation going on at EU level. . . and we need to be aware of the impact,” she said. “Companies on both sides of the Channel are saying the same thing: we want high standards and we don’t want to diverge too much.”
The problem also affects service companies. MHA accountants have warned that EU tax rules for virtual services will change in January 2025, meaning UK businesses providing online facilities to consumers will have to pay VAT where the customer resides rather than in the UK United, as it is now.
Sue Rathmell, partner at MHA, said: “UK companies providing virtual services [business to consumer] EU services, such as webinars, online conferences, or adware, require prompt entry from [HM Revenue & Customs] in response to the EU’s intention to revise the place of supply rules from January 2025.”
McReynolds said one of the biggest challenges for businesses was the vastly different approaches of different EU member states to implementing regulations such as the bloc’s requirement to recycle plastic packaging.
Some countries, including Spain, enforce the rules more strictly than others, with some EU companies now insisting that UK companies provide proof that plastic components of manufactured goods also comply with the regulations, a he added.
When the UK was a member of the EU, these rules were automatically transposed into UK law and businesses were presumed to have complied for the entire single market.
As a non-member, this presumption of conformity has been removed. “Post-Brexit UK businesses must comply with national interpretation of EU directives from 27 different regulatory regimes,” McReynolds said.
Make UK and the UK Chambers of Commerce say the UK no longer automatically transposes EU law, the UK government needs to do more to assess the impact of future bloc regulations, as well as the use of the trade and cooperation agreement between the two parties to better coordinate with Brussels.
Britain’s Department for Business and Trade said the deal “opens up new opportunities” for British businesses in the EU.
“We will continue to assess the impact that new EU laws may have on our commercial interests, as we do with other trading partners.”
However, Bain said there needed to be a much broader discussion about regulatory developments on both sides. “We have to improve a lot in this area. Everyone needs to improve their game.”
Make UK has called on the government to create a central register of impending EU laws and help UK businesses analyze what they mean for business.
The alternative for UK businesses is a repeat of the chaotic and costly learning curve that followed the implementation of the Trade and Cooperation Agreement in January 2021, just a week after the deal was struck. of the eleventh hour between the UK and the EU, Crozier said.
Based on past form, he was not optimistic. “We’ve been flying blind all along as manufacturers. We didn’t know what Brexit we were going to have until the very last minute, and I don’t believe it won’t be the same scenario again.