Triple Shock: How it will affect UK companies

The UK has been facing important challenges over the last few years: Brexit has toughened administrative processes to export to the EU, the Covid-19 pandemic has put a light on recruitment issues and has even emphasized them, the Green transition has made the mutation for certain industries unavoidable. These are hard times for UK companies.

Nord France Invest has partnered with Bob Hancké, Associate Professor in Political Economy at the London School of Economics and Political Science, and Laurenz Mathei, Founding Partner and Managing Director at the consultancy cabinet PEACS in order to create a high-value free-to-download technical report

What is the premise of this document? It tackles in a comprehensive way the Triple Shock that the UK is currently facing.

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A report written by Nord France Invest, Bob Hancké, Associate Professor in Political Economy at the London School of Economics and Political Science, and Laurenz Mathei, Founding Partner and Managing Director at the consultancy cabinet PEACS

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The genesis of Brexit

As a result of a referendum, the UK voted to leave the European Union on June 2016. On 31 January 2020 the UK formally left the EU, then exited the Single Market and Customs Union 11 months later, on December 31, 2020. Even though a hard-Brexit was avoided, the introduction of new regulations might put your business at risk.

The main reforms

New reforms have been introduced and might complicate trade for UK-based companies heavily reliant on exports.

Here are the ones to keep on the watch for your business:

• The transition from CE to UKCA marking: By 1st, January 2021, all UK product will have to be UKCA marked. The main issue is that the European Union only recognizes CE-marking on its territory.
• The Rules of Origin: To qualify for tariff-free exports, a certain percentage of your goods’ components have to be produced either in the EU or the UK
• The EU VAT rule: A new VAT reform for e-commerce was introduced on 1, July 2021. To put it briefly, country-specific value-added tax threshold are being removed.

These new regulations will likely affect UK-based companies relying on exports to the EU market. Indeed, almost 50% of all UK exports of goods in 2019 went to the EU.

Focus on the Trade coorperation agreement

The TCA raises a dilemma for the UK : either stick to EU standards or modifiy them to facilitate new trade agreements.

The latter implies taking a risk for UK-based companies to stop accessing the Single Market.

The impact on different industries

The automotive industry 

The automotive industry is heavily reliant on exports, since 80% of UK-made vehicles are exported, and half of them are exported to the EU.

The service industry

For the service industry, there will be new requirements for UK contractural service suppliers such as the need for a new Visa or work permits.

In addition, companies have to pay in advance the £1,000-per-year Immigration Skills Charge for the Visa.

This also includes new regulations concerning data privacy. Non-EU countries must be afforded data adequacy to store and process data of EU citizens. This right has been limited to 4 years by the European Union.

The agrifood industry

The agrifood industry is highly reliant on exports since over 60% of them go to the EU. The main concern should be about the rules of Origin. Products will have to undergo phytosanitary checks (which are expected to be implemented by the end of 2023) before entering EU customs territory and British companies will need to apply for an export health cetificate (EHC).

The triple shock : Brexit, the Covid-19 pandemic and the green transition

To say that Brexit had a bad timing would be an understatement. The series of new UK reforms came at the same time as the Covid-19 pandemic and the Green transition.

The current pandemic’s impact

Not only were UK exports affected by new Brexit reforms but companies were also at a standstill for a while during the multiple lockdowns. This has highlighted many issues with the way companies operate, such as our production models.

The job Market is one of the main collateral damage. The current pandemic has highlighted the already existing issues companies were facing such as:

• Finding skilled talent and skills
• Recruiting EU citizens after Brexit

The implications of the Green transition

One new challenge of our century is the decarbonisation of our economy. This implies being more eco-conscious regarding the way companies work. It includes the components you are using, your logistics and overwall your entire processes.

The automotive industry will be the most affected. For example, both EU and the UK are suggesting ban over diesel and petrol in order to favor electric cars. In addition, this industry is obviously highly reliant on batteries. The main issue, is that most of them do not meet the Rules of Origin’s requirements.

As such, the development of the battery industry is a necessity but the batteries currently used by the automotive industry are for the most part incompatible with Rules of Origin.

In other words, Brexit combined with other external factors such as the Covid-19 pandemic have reinforced uncertainties for UK companies.

How can you avoid that?

Having a subsidiary on EU soil for UK companies would enable them to keep accessing the Single Market, to have the CE marking, reduce friction and logistics costs and last but not least, to have easier access to non-UK talent and skills.

Northern France: Your closest European neighbour

The European countries offering a seafront benefit from a fast and smooth connection with the UK, with closeness being a strong asset for that type of development project.

The Hauts-de-France Region is located just accross the Channel and offers many competitive advantages

It will enable you to have:

• A direct access to the European Market as well as the French Market
• Available and skilled worforce
• Optimised logistics through rail, road or sea
• Attractive operational costs
• A highly commited region in sustainable development through the REV3 project

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