Small businesses and the agri-food sector have been hardest hit by changes to trade following the implementation of the Trade and Cooperation Agreement (TCA) nearly a year ago, peers warn.
In a report published on Thursday, the Lords European Affairs Committee calls for the government to do more to support SMEs, including reinstating funding to help them access professional support.
Since the agreement of the TCA and the end of the transition period, businesses trading goods between GB and the EU have faced challenges because of new administrative burdens.
The committee finds that additional administrative burdens have fallen particularly heavily on small businesses with fewer resources to draw upon to help them adapt, affecting SMEs in the UK and EU.
Sanitary and Phytosanitary (SPS) requirements, designed to protect against diseases, pests, or contaminants being imported or exported, have continued to present a major barrier to GB exports of agri-food products since the agreement of the TCA.
For agri-food businesses, this has been exacerbated by the volume and perishable nature of products they trade in, resulting in GB exports become slower, less competitive, and more costly.
The committee calls on the UK government to seek an agreement on SPS with the EU as an urgent priority and to do more to provide access to professional support for small businesses.
It recommends government restore a version of its SME Brexit Support Fund but with wider eligibility criteria businesses were only eligible for support from the original fund if they traded exclusively with the EU.
The report also investigates the government’s recent delay to the introduction of certain UK import controls.
It concludes that the arguments for and against this decision are finely balanced, with some firms welcoming the extra time but others arguing that the delay has undermined business planning and puts UK exporters at a competitive disadvantage to their EU counterparts.
Peers also express big concern about the imminent expiry of the grace period for suppliers’ declarations on rules of origin, and the introduction of the requirement for full customs declarations, on 1 January 2022.
They warn there is likely to be some further short-term Brexit disruption in the New Year as these new requirements are phased in, though how extensive this turns out to be will depend on the government’s attitude to enforcement of the new rules.
The committee also urges the government to do all it can to communicate the new requirements, particularly to small businesses, ahead of the deadline.
Lord Kinnoull, chair of the committee, said the frictional impact of the new trading environment on business since the implementation of the TCA had been uneven.
"Smaller businesses, which often lack the resources to adjust to new administrative burdens and the agri-food sector, which faces an additional set of issues in the form of sanitary and phytosanitary requirements (SPS), have been particularly hard hit.
“With further customs and rules of origin requirements for importers coming down the track in a matter of weeks, it is vital that the government communicates these deadlines to businesses and enforces them in a patient and pragmatic manner.
“It is important that these current challenges do not disincentivise GB-EU trade in either direction," Lord Kinnoull added.
"The goal for both the UK and the EU should be to develop a mutually beneficial and truly efficient trading relationship.”
