What the EU-UK Trade & Cooperation Agreement Means for UK Businesses

The EU-UK Trade and Cooperation Agreement (TCA) marks a significant milestone in the post-Brexit era, establishing the new framework for trade between the United Kingdom and the European Union. Since its implementation on 1 January 2021, the TCA has profoundly impacted UK businesses, reshaping trade dynamics and regulatory environments.

This article serves as a comprehensive guide for small to medium-sized enterprises (SMEs), entrepreneurs, and business owners involved in UK-Europe trade, offering insights into the TCA’s key provisions and practical advice for navigating the new trade landscape.

What is the EU-UK Trade & Cooperation Agreement (TCA)?

The EU-UK Trade and Cooperation Agreement, enacted provisionally on 1 January 2021 and fully on 1 May 2021, establishes the legal framework for the post-Brexit trade relationship between the UK and the EU. Key elements of the TCA include:

Zero Tariffs and Zero Quotas: The TCA allows for the tariff-free and quota-free exchange of goods between the UK and EU, provided that products meet the rules of origin requirements.
Comprehensive Coverage: The TCA covers trade in goods, services, investment, public procurement, intellectual property rights (IPR), air and road transport, energy and sustainability, fisheries, and social security coordination.
Level Playing Field and Sustainable Development: Commitments to fair competition and high protection standards in areas such as environmental protection, social and labour rights, and state aid ensure a robust level playing field.

The TCA is crucial for UK businesses. It ensures continued access to the EU market while establishing new compliance and regulatory requirements.

How Does the EU-UK Trade Deal Affect Goods Trade?

Zero Tariffs and Quotas

Under the TCA, UK businesses benefit from zero tariffs and zero quotas on goods traded with the EU. This is a significant advantage, maintaining the cost competitiveness of UK exports in the European market. However, businesses must adhere to rules of origin requirements to qualify for these benefits.

Rules of Origin Requirements

Rules of origin determine whether a product qualifies for tariff-free trade. To meet these requirements, a product must have a certain percentage of its value originating from within the UK or EU. Compliance can be complex, requiring detailed documentation and verification of supply chains.

Changes in Customs Procedures and Paperwork

One of the most significant changes post-TCA is the introduction of new customs procedures. Businesses must now complete customs declarations for goods entering and exiting the UK. This process includes:

Import and Export Declarations: Detailed paperwork is required for each shipment, covering product descriptions, values, and origin.
Health and Safety Standards: Compliance with EU regulations on product safety, health, and environmental standards.
Sanitary and Phytosanitary (SPS) Checks: Additional checks are mandatory for agricultural and food products to ensure compliance with EU standards.

Impact on Supply Chains and Logistics

The new customs procedures and paperwork requirements have had a profound impact on supply chains and logistics. Delays at borders, increased administrative burdens, and the need for new infrastructure have posed challenges for UK businesses The Windsor Framework, a recent development aimed at easing the movement of goods between Great Britain and Northern Ireland, seeks to address some of these logistical challenges.

What Are the Effects on Services Trade?

Market Access for Services

The TCA’s provisions for services trade are less comprehensive compared to goods. Key sectors affected include financial services, legal services, and research and development (R&D). UK service providers now face new barriers to entry, such as the need to establish a local presence within the EU or comply with diverse national regulations.

New Requirements for Service Providers

Service providers must navigate a range of new requirements, including:

Regulatory Compliance: Adherence to different regulatory standards across EU member states.
Professional Qualifications: Recognition of professional qualifications may no longer be automatic, requiring additional certifications or registrations.
Data Protection: Compliance with EU data protection standards, including the General Data Protection Regulation (GDPR), is crucial for digital and online services.

Impact on UK Trade Performance

According to insights from UK in a Changing Europe, the TCA has led to a reduction in the volume of services trade between the UK and the EU. The increased regulatory complexity and the need for businesses to establish a physical presence within the EU have contributed to this decline.

What Are the Rules of Origin and Compliance Requirements?

Rules of origin are criteria used to define where a product was made and are crucial for determining eligibility for tariff-free trade under the TCA. These rules require that a product contain a certain percentage of content originating from the UK or the EU.

Steps Businesses Must Take to Comply

To comply with rules of origin, businesses must:

Understand the Specific Requirements: Each product category has specific rules of origin requirements.
Maintain Detailed Records: Documentation proving the origin of materials and the production process is essential.
Regular Audits and Updates: Regularly review and update compliance procedures to ensure ongoing adherence to rules.

Impact on Different Industries

Manufacturing: Manufacturers must source materials strategically to meet origin requirements.
Agriculture: Farmers and food producers must ensure their products comply with SPS checks and origin rules.
Textiles: The textile industry faces complex requirements due to the diverse sourcing of materials.

How Have Customs and Border Procedures Changed?

The TCA introduces new customs procedures that businesses must navigate. These include:

Customs Declarations: Every shipment requires detailed customs documentation.
Import VAT: VAT must be paid on goods imported from the EU, adding a layer of financial management.

The new procedures have led to increased delays and logistical challenges. Common issues include longer processing times at borders and increased costs associated with compliance.

Tips for Smoother Customs Clearance

Prepare Documentation in Advance: Ensure all paperwork is complete and accurate before shipping.
Use Customs Brokers: Engaging professionals can help navigate complex procedures.
Stay Informed: Keep abreast of changes in regulations and procedures.

What is the Impact on SMEs?

SMEs often face greater challenges due to limited resources. The increased administrative burden and compliance costs can be particularly taxing, making it essential to leverage available support and streamline processes.

SMEs face unique challenges under the TCA, including:

Increased Administrative Burden: There is a need for detailed customs documentation and compliance with rules of origin.
Supply Chain Disruptions: Adjusting supply chains to meet new requirements can be complex and costly.

Despite challenges, SMEs can find opportunities by:

Exploring New Markets: The TCA provides access to EU markets without tariffs and quotas.
Innovating and Adapting: Embracing digital solutions and new business models can help mitigate some challenges.

Government support, such as grants and advisory services, can help SMEs navigate the new landscape. Additionally, new trade deals, like those with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), can open further opportunities.

What Government Support and Resources are Available?

The UK government offers a range of support measures, including:

Financial Grants: Funding to help businesses adapt to new trading conditions.
Advisory Services: Expert advice on compliance and market access.
Training Programs: Workshops and training sessions on customs procedures and regulatory requirements.

Businesses can access various tools and resources, such as:

Trade and Investment Hubs: Regional hubs providing local support and advice.
Online Portals: Platforms like the UK government’s trade portal offer detailed guidance and resources.

How to Access Government Help

To access government support, businesses can:

Visit Government Websites: Check official websites for information on available support and application processes.
Contact Local Trade Bodies: Engage with local trade associations and chambers of commerce for tailored advice and support.

J. Dauman & Co Can Help You Navigate EU-UK Trade

Navigating the complexities of the EU-UK Trade and Cooperation Agreement can be challenging, but with the right guidance, UK businesses can thrive. J. Dauman & Co offers expert accounting, logistics, and international trade services to help businesses adapt to the new landscape.

Our team of professionals can assist with compliance, strategic planning, and leveraging new opportunities, ensuring your business remains competitive and successful in the evolving trade environment.