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Retail Trends 2021: When will the Brexit disruption to retail trade end?

10 February 2021
We have a trade deal but the promise of easy and tariff free trade looks difficult to achieve. How do we to ensure that our supply chains continue to operate?

It's now been more than a month since the Implementation Period for Brexit ended and we can see that the promise of simple effortless trade is far from the truth. 

So far we have seen a lack of clarity and substantial barriers to trade between the EU and UK and even within the UK to the retail market in Northern Ireland. From the highly publicised tariff woes around Percy Pigs, to supermarkets choosing not to put certain stock on the market, to online retailers choosing not to fulfil their orders for certain products. It is perhaps not as complex as orchestrating the upcoming landings on Mars, but for those having to navigate this all for the first time, it certainly feels like it.    

The devil is in the detail of these things, given that the actual trade deal did not materialise until a week before it was due to come into force, and since the beginning of December guidance and other documents have been appearing at a fast pace, all of this means it's unsurprising that many people are playing catch up. The government is still changing the law, in GB where legislation correcting many of the curiosities that existed in the amended post-Brexit legislation are only just appearing. Food labelling law is only now about to be changed in GB to make the person who places the food on the UK market, and not the EU market (where since January the food may never have been), the one responsible.  

We heard the political celebrating of zero tariffs, but in truth they only apply to certain products in certain ways, trade is much less free than it used to be. Even the process of identifying your product against the relevant code can be almost impenetrable. Thankfully, there are tools on the government website to help with that part. 

However, those tools cannot help you determine if the rules of origin apply to allow your product to benefit from zero tariffs. Can you show that your product is wholly obtained in that party, or, for those products incorporating non-originating materials, that it meets the product specific rules?  If not, tariffs apply.  If you are moving something that was not from the UK and then placing it on the EU market then you may, unless you attend to your supply chain, end up paying tariffs you don't expect to. To ensure your supply chain attracts tariff free trade with the EU you can view our webinar recording >

What about Northern Ireland? 

It is easy to say that the Northern Irish Protocol was agreed a couple of years ago and therefore there was time to prepare, or that the warning signs for this have been there for some time.

It is clear that the governments and departments like DAERA have done a huge amount of work to try and demystify the baffling complexity of this situation and provide guidance, but even trying to digest this is often not enough to make products move smoothly. As each week passes we are seeing businesses finding more and more difficulties in doing what was routine before. We have already seen the vaccine issue shining a spotlight on what can happen. 

Just trying to understand the legal framework will be a full time task for people.  Understanding what products are still regulated under EU law in NI and which are under NI or UK law will be key to understanding compliance. Trying to unpick 'what applies when' will be, unnecessarily, expensive. Trying then to understand if a product moved from GB to NI is imported for the purposes of product compliance legislation vs border controls also presents an interesting conundrum and the answer may not be the same for all products. The EU guidance uses the term imported, UK guidance typically describes the product as having been moved…    

Is the worst still to come?

All of this is occurring at a time where trade is not yet at peak level, COVID-19 retail closures means that demand is lower than it would usually be, and retail in particular is benefiting from a derogation on border controls on trade to NI that until April makes things much simpler. Despite relatively low volumes, we are seeing supply chain delays around the EU, deliveries that were taking 3 days are now taking 6-9 and the timescales quoted by freight forwarders is growing substantially. We're also seeing wildly differing document requests for the same products across EU ports, and sometimes even the same product in the same port will require different documents from one shift to another. Others are telling us of long delays to get their products moved to or from the UK using the well-known logistics providers with a week now feeling speedy.

As the weeks pass, we are finding more and more curiosities with the new regulatory framework in which we operate. It is clear that those civil servants charged with trying to make this happen have done their best, but the task is and remains gargantuan. Thousands of EU regulations have been transposed and incredibly complex UK regulations have amended them to make them work in the UK, but it has been very difficult for anyone to keep up with the relentless pace of change. More and more guidance keeps coming out and while that is appreciated, it often adds more complexity as we try to understand the legal basis for the new position. Even the most basic question can result is significant uncertainty which does not benefit anyone. 

One things for certain, the UK (in part) can now set its own agenda and decide its path on the many topics that EU Directives would have expected action on this year, single use plastics and the Directive on unfair trading practices in business-to-business relationships in the food supply chain are two examples where this summer the UK should have published domestic laws which should be in force by the end of the year. Now, he UK can choose if it wishes to follow this path or to chart another, well more specifically four other paths as topics now can see the national policy of the four parts of the UK resulting in greater domestic regulatory devolution. 

Are there solutions to all of this, yes, of course there are. Time will allow people to reconfigure and adjust supply routes and timings in order to get back to as near as possible what we had before. But, it will take time, probably all of 2021 and beyond, and cost a fortune.  

We have just scratched the surface here of the issues affecting supply chain with the new UK/EU trade agreement. For more detailed information and examples and to understand how to ensure your supply chain attracts tariff free trade with the EU you can view our webinar recording >
 
If you have a specific question around your supply chain or require expert advice, please get in touch with Dominic Watkins, Head of Retail, Food & Hospitality Sector. 


Find out more about the other big trends impacting the retail industry this year

Further Reading

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