The cost of Brexit to businesses

Back in 2019, the British government estimated the probable cost of Brexit to British business would be around £7.5 billion. If this figure has since been revised, it has not been released. During 2023, the UK handled a total of 39 million customs declarations.

Between January 2021 and December 2023, food importers paid £54 million pounds for food safety checks (SPS) on inbound consignments. Over the coming months, traders are expected to pay a further £469 million to set up SPS and Safety and Security (SSD) systems.

These are some of the figures published today by the National Audit Office (NAO) along with its findings on the government’s management of the Brexit process so far. It is still too early to talk of Brexit as if it was a completed process. Download the NAO’s findings here, or watch this space…

Huffin’ and puffin

Fish for lunch…

From the soaring concrete cliffs of Brussels there is an impending explosion of anger. The reason? Look at Charles Sharp’s impressive picture of a puffin, just about to enter the home burrow with a beak full of sand eels. It is the fish, not the bird,  that is fanning the flames, by the way.

For all its comical looks, the puffin is an important indicator in the monitoring of the marine environment around the British Isles. Researchers are particularly interested in the fish stocks that support this distinctive seabird. The  term sand eel is a generic label for a group of about 200 fish species that resemble eels but are not related. They burrow into sandy seabeds and hide from predators while keeping an eye out for their own lunch. Hard to catch in open water, they are easy to scoop up in a dredge, as Danish fishermen have done for centuries.

Puffins are far from being the only bird species to be tracked by scientists. It just happens to be the cutest one of the bunch. The puffins’ lunch, by the way,  is at constant risk of damage from bottom trawling, that is to say beam trawls or dredgers and other devices. Scallops is one species to be caught in dredgers, while cod is a target species for many beam trawls.

Back in January this year, the UK government announced a ban on dredging for sand eels in UK-controlled Marine Protected Areas (MPAs). For the record, bottom trawling is allowed across 98% of the MPAs concerned, suggesting that the state of the seabed has not been a political priority for years. In the North Sea, with its sandy sea floors, there are still  beam trawlers fishing demersal species and small number of Danish dredgers who, between them, hold about 90% of the 160,000 tonne sand eel fishing quota. (UK and EU total) 

The origins of the Danish sand eel fishery go back to the soaring livestock holdings of the late nineteenth century, which set the Danes looking for cheap ways of feeding animals. Initially, small dredges were fitted to inshore boats, scaling up in the early twentieth century to purpose-built diesel powered vessels with an ever greater range. For some reason, as with a number of other fisheries, nobody imagined that the fish stocks would ever decline: until, that is, the catches started to drop. With growing numbers of animals on livestock holdings, the potential earnings from sand eels rose, as did the pressure on the fish stocks. Sand eels, along with other oily fish and suitable bycatch, are the ingredients of fishmeal, an industrial end product turned out in large quantities by refineries that earned a living clearing up after the high value fish processors in fishing ports. 

In the early days of indoor livestock, fishmeal was added at two thirds to one third cereals. As researchers extended their knowledge of livestock nutrition,  the proportion of fishmeal was reduced, making animal feed more profitable or cheaper, depending on your involvement in the process. To ensure an illusion of sustainability for food production in the late twentieth century, the European Commission devised the Common Fisheries Policy, which used its budget to subsidise a rise in the European fishing industry’s tonnage and horsepower, ensuring an ever more unstable fishing industry. 

Fast forward to 2024, and the European Commission is threatening to trigger a dispute procedure under the EU-UK Trade and Co-operation Agreement (TCA). The Commission is acting on behalf of Danish sand eel fishers with fishing vessels to maintain. If agreement is not reached by mid-June, the Commission  can request a judgement on the UK’s  action. While any hearings may be carried over into September, the European Commission is calling for an “evidence-based, proportionate and non-discriminatory” approach to protecting marine environments.  

“The UK’s permanent closure of the sand eel fishery deprives EU vessels from fishing opportunities, but also impinges on basic commitments under the EU-UK Trade and Cooperation Agreement,” warned commissioner  Virginijus Sinkevičius. “Measures are already in place to protect this important species, including by setting catches below the scientific advised levels and closed areas for protecting seabirds,” he added. London responded, saying that DEFRA had not authorised any sand eel quota for British vessels for the past three years. Marine protection NGOs across Europe have launched a campaign to end bottom trawling, which is still allowed in 90% of the EU’s marine protected areas (MPAs). Last year Europe agreed to an EU Marine Action Plan that phases out bottom trawling by 2030. This has some way yet to go.

According to the European Market Observatory for Fisheries and Aquaculture Products (EUMOFA) the EU produces between 10% to 15% of the world’s fishmeal and fish oil output. Tonnages of EU fishmeal range from 370,000 tonnes and 520,000 tonnes, while fish oil ranges between 120,000 and 190,000 tonnes. Denmark accounts for nearly half the EU’s total output. In addition to sand eels, EU processors use small pelagics, such as sprats, whiting or herring, all regulated with quotas and topped up with trimmings from fish processors. EU demand for fishmeal has dropped in recent years and is currently hovering around 450,000 tonnes/year. 

Every one of them is different

Sky News is currently streaming an overview of British farming (https://news.sky.com/story/it-keeps-me-awake-at-night-can-british-farming-survive-13132220) which raises a number of questions that have been dodged for years and are coming home to roost with a certain inevitability. They are as predictable as ever, as intractable as ever and demand answers as urgently as ever. The only certainty is that the farming sector faces a crisis which has been ignored for years and will no longer wait in an orderly queue.

The first thing that needs to be made clear at the outset is that there is no such creature as an average farmer. The Sky presentation is very careful to choose visually tame representatives of a sector that  is universally misunderstood. Sky’s lead journalist on this reporting, the west of England and Wales correspondent Dan Whitehead, would doubtless agree that despite the rapidly falling numbers of farmers in Britain, there is no such creature as an “average” farmer anywhere in the world.

The industrial world develops and markets a range of specialist vehicles and technology for a sector that has as many solutions for its many technical challenges as it has practitioners. The general public, in Britain and further afield, has no problem synthesising a stereotype notion of a nonexistent rural world. In the process, any suggestion of  a viable business model  runs counter current to the town dweller’s vision of a rural idyll.

It would not be productive to imagine that rural businesses are complementary to industrial or urban economic structures. Nor can the transport and distribution networks that link urban consumers to an imagined rural hinterland ever ensure that each business gets what it needs in a timely manner.

A frequent town dweller’s  notion of a farm is more like a zoo than a production unit. Go back a century or so to George Orwell’s Animal Farm and you encounter a group of anthropocentric livestock: hens, pigs, cattle and heavy horses. Truth to tell, if it ever existed, this diverse community of livestock was a casualty of the first world war. The two million British equine casualties had a greater impact on warfare and industry than the loss of several millions of military personnel or civilians killed in air raids elsewhere. British army officers were required to supply a horse’s  front hoof when reporting an equine casualty, whereas they did not need to furnish any such grisly evidence for human casualties among their ranks.

The wartime massacre of draft horses was beyond the breeding capacity of the northern hemisphere and cleared the way for mechanisation in both rural hinterlands and metropolitan centres alike. The British army bought in horses from as far away as North America, but they were ill-suited to military requirements.

Both agriculture and industry have exhibited huge appetites for energy during the past two centuries. The combined effects of converting the plains of North America into a grain exporter on a continental scale. This was accompanied by the relentless westward advance of the railroads through the 1850s and 1860s, hauling wheat back to the east coast and shipping it on to Europe. 

The age of steam put bread on the tables of starving cities. It may even have given urban populations a passing curiosity as to where food comes from and what sort of people might produce it. But the only people that ever had contact with producers and consumers were traders with a limited interest beyond crop forecasts and spot prices. It is hardly surprising that during the intervening decades, a parallel web of dreams fed on pictures in books and magazines should inhabit part of the cultural vacuum between town and country. 

Dan Whitehead’s rural narrative assembles facets of the  agricultural world as a kaleidoscope might do. He starts by talking to Welsh sheep producer Rhodri, who has seen a 40% cut in his income, now shorn of subsidy. He is worried that his school age son will not inherit the family farm.

Outdoor pork producer Jeff laments the supposed passing of the British pig industry. Like many British pig producers, he believes his European counterparts are subsidised as generously as they have ever been. He can’t go into a supermarket without spotting foreign meat: pork chops from Spain, chicken from Poland and Brazil. He can sum up Brexit in one word: “atrocious”. From his farm in Kent,  Jeff drove a tractor up London for a city centre protest. Like many in the pig sector, he is adamant that breeders have been thrown under a bus by a government that doesn’t care. “There’s an  unfairness in British agriculture,” he argues. Looking at the deals the UK government signed with Australia and  New Zealand, he might have a point.

Nearby, fruit grower Tim has built up a strawberry business valued in tens of millions of pounds. He needs a workforce of 2000 to pick thousands of tonnes of strawberries. Most of his recruits are from EU member states. When the UK was in the single market, workers could move  freely with no time limits. Now they are limited to six months and have to move on regardless of whether or not they are a net gain or a net drain on their employer. Tim is frustrated because he cannot negotiate prices for his crop from a solid position. 

There are plenty of British pig producers who will argue that foreign pigmeat is hindering domestic producers, but the story is a little bit more subtle than that. If British producers could earn a living off the sales of pork loins, they would cheerfully do so. Since loins are used for roasting joints or bacon, there will always be buyers for this cut. This often leads to a situation whereby British loin are sold through for roasting joints. Meeting demand for bacon packers, there is a steady trade in pigs from Dutch and Danish units. These have been raised to British standards for decades and are effectively competing on a level field, even if their British counterparts see it differently. The key to staying in business is referred to as balancing the carcase, ensuring that every saleable part of the carcase is sold. Hams or gammons are straightforward to prepare for the retail market and represent a good return. What British pig breeders often overlook, however, is that they will routinely export forequarters to cutting halls in northern Europe, which have skilled workforces that make short work of the technically challenging forequarters. These are home to the animal’s powerful jaw muscles. If a pig bites your hand, count your fingers as soon as you’ve stemmed the bleeding.

Week 19 news grist

Events that added grist to the news mill during week 19, 2024.

The descriptions and content of these brief items are kept as short as possible: if you want to follow up the details of a story, click the link that will always be provided.

Is Labour doing the right thing when it accuses the Tories of “gaslighting” the state of the British economy, that is to say querying the tory grasp of economic indicators to unsettle conservative assumptions? Top of the list: will Thursday’s meeting at the Bank of England really decide to keep interest at 5.25%?

Read it here: https://news.sky.com/story/government-gaslighting-public-about-state-of-economy-labour-claims-13130738

Livestock farmers are facing the threat of wind-borne midges carrying a new strain of blue tongue virus across the North Sea, potentially infecting British sheep and cattle. The illness is established in northern Europe, where it causes significant livestock losses.

Read it here: https://www.bbc.co.uk/news/science-environment-68944155

Tea time: Manchester Evening News parent editor Emma Gill compares retailer brand tea bags after a series of substantial price rises.

Read it here: https://www.manchestereveningnews.co.uk/whats-on/reviews/i-tried-cheapest-supermarket-tea-29098610

The outlook for olive oil supplies is as grim as ever. Sarah Butler lines up the industry’s international data and tells readers of The Guardian to expect more of the same. Urban Food Chains ran an overview a a few months ago.

Read Sarah Butler’s piece here: https://www.theguardian.com/business/article/2024/may/07/extra-virgin-olive-oil-prices-global-production

Good news from pesticide campaigners: PAN Europe has become the first civil society to win a substantive case in Europe’s highest court. Pesticide Action Europe challenged the absence of any new scientific data in support of product approval renewals. The EU Court of Justice found in favour of the campaigners, adding that authorisations and renewals at national level should be fully documented and should no longer rely on the work of other member states when renewing product licences. The decision should stop the endless re-use of data going back decades. Read more on the PAN Europe website.

Defection of the week: Dover MP Natalie Elphicke crossed the floor of the House of Commons to join the Labour party benches. It will be interesting to see how her position will change on things like the Brexit border tax. To help readers spot the changes, I downloaded a couple of posts on May 9 from https://natalieelphicke.com, laying out her position before she jumped ship. The original posts were here: one makes the case for providing adequate funding to allow Dover Port Health Authority to maintain its biosecurity targets and the other highlights ways in which Blockchain applications can speed up border checks. Just in case the originals disappear, download the May 9 versions here and here.

Strong European cheese is a taste challenge to consumers in south east Asia, where the strong flavours and live textures literally get up the noses of potential export customers in cities like Singapore. The BBC filed this report about the seasoned export cheese sales teams from countries such as France, Italy or Switzerland. They are very careful not to push their challenging products until they have earned the confidence of prospective customers. British cheese sales teams headed for Asia with high hopes of conquering sales prospects with cheeses like Stinking Bishop. The broadcasters learnt that the British team was only allowed to promote their strong-smelling cheese at the show because they paid to exhibit at the show on the spot with their own money.

Read the full story here: https://www.bbc.co.uk/news/articles/c03ded49zw2o

Oxford Real Farming Conference 2025 supporter tickets are now on sale: follow the link…

How many of us knew that IKEA is a major landholder in Romania? Click the link and find out why this might matter. https://action.eko.org/a/stop-ikea-from-destroying-europe-s-last-ancient-forests

Representatives of the National Farmers’ Union (NFU) have been meeting DEFRA ministers and officials to request a post-Brexit review of water quality standards, according to The Guardian. (https://www.theguardian.com/environment/article/2024/may/10/farmers-union-lobbied-to-increase-pesticide-limit-in-uk-drinking-water). 

The NFU knows the rules on water and reminds its members of their obligations. (https://www.nfuonline.com/updates-and-information/farming-rules-for-water-what-you-need-to-know/) Shame they want to move the goalposts, though.

Beyond belief or beyond reason?

These are strange times. There are things going on that beggar belief and defy reason. Since leaving the single market, the UK has been developing an administrative structure to manage the country’s imported goods, the Border Target Operating Model (BTOM). There is no way that BTOM can be described as Brussels red tape. It has been drafted and implemented by the British government. So why is the British government taxing food imports of plant and animal products? Last week, the story was that importers would be charged for the running costs of Border Control Posts. This would be no more than GBP145 per lorry, we were told.

It appears that we were told wrong

When a haulier buys a ticket from Calais to Dover, the price now covers the journey as far as the outboard end of the loading ramp at Dover. From the dock to the UK road network, the price is dependent on what the lorries are carrying and how the paperwork is organised. For a single consignment load of any thing other than plant or animal products that qualify for SPS (Sanitary or PhytoSanitary Checks), the road is clear. For those carrying goods that do qualify for SPS tests, they will be charged Common User Charge (CUC), regardless of whether or not they are held for inspection. This is billed separately at GBP10 or GBP29, per consignment line, up to a maximum of five lines per Community Health Export Declaration (CHED). Inspections have always been charged separately and in addition to any other costs.

About two thirds of freight shipments coming into Britain share trailer space between a number of companies, who effectively go Dutch to spread the shipping costs of small and often varied consignments. Known as groupage, it used to be an economical way of managing transport costs. However, It would appear that there is no upper limit for the Common User Charge. Trade bodies are warning that shipments could generate CUC bills of up to GBP2000 for a single trip. This is a completely new randomised body blow for the logistics industry,.

After three years’ of false starts for carrying out routine safety checks on food imports, 2024 has seen two of the three phases of BTOM rolled out. The BBC spoke to wholesale florist John Davidson, who has seen around GBP 200,000 added to the annual cost of running his business, literally overnight. Talking of overnight, there is talk of closing government-run BCPs at 7.30 in the evening: for anyone in logistics, this is unthinkable. Anyone who has ever driven on the country’s long distance network will be aware that delivery vehicles are at their busiest in the small hours of the morning, as are the wholesale markets.

The measures announced last Tuesday (April 30) will send countless SMEs to the wall, whether or not they import food, just because the economy is being ripped apart. Not slowly, but in a confrontational manner. Passive aggressive is not a contradiction in terms, but a symptom of deep-seated anger.

Ports in practice

The most important difference between a port and any other sector of the economy is that ports all operate 24/7 and mesh their activities to match local tides. There is no question of working to any other priority. Port owners charge for their services on the basis of weight/mass/size and will charge penalty payments for disruption to their schedules caused by a client’s time slippage. Basic services include loading/unloading cargo; storing goods; transferring goods from one vessel to another; dockside crane lifting. 

Penalties are imposed for late arrival; early arrival; storage without prior booking; demeurage, which was a medieval tax on saleable goods or assets deliberately kept out of the market in the hope of getting a stronger price at a later date. Readers may also encounter an anglicised spelling, demurrage.

Shipping lines pay port operators to get haulage and passenger traffic through the port and on to a ship. The roadways are all a part of the service and an opportunistic tax just to keep traffic moving is equivalent to being slapped round the face with a wet towel. The inland BCP at Sevington cost either £154 or £174 million to set up, depending on whose narrative is being presented. But it is not worth a brass farthing unless it works 24/7 and worth even less for not being part of a transport network node, not to mention twenty miles or so inland from the port of Dover.  DEFRA fails to specify that the site operates 24/7, but this can deducted from the website’s reference to unhappy local residents kept awake by the nightime floodlighting. Sounds like the worst of both worlds.

The elephant in the room

A wall of silence still surrounds  the computer system at the heart of the BTOM, called the Single Trade Window (STW). This will be the one and only way of getting data into the system. The final version*⁠1 of the BTOM guide, published on February 11 states: “ …the Single Trade Window could be fully operational in 2027.” 

There are a number of reasons why this could be awkward, but one will do. The STW calculates the aggregate cost of wear and tear caused by lorry traffic to roadways at ports. This operational detail is  used to set a levy called the Common User Charge (CUC). This is payable when a lorry leaves a port: the CUC is added to a rolling monthly invoice. While the STW sets a figure for Government operated ports, private operators were invited to fix their own charges, as they would do for anything else.  Dover and Portsmouth,  the two busiest ports in the UK, both happen to be owned and operated privately.

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Brexit’s hostile environment

The British establishment has a number of strengths, not all of them positive. Long standing cultural patterns such as racism or mysogyny are not always associated with the toxic knee jerk emotions they unleash. Sometimes stretching back for generations, past prejudices cast veiled shadows over current mindsets. 

A common marker of such underlying tendencies is the urge to promote a hostile environment for groups that the establishment does not feel comfortable around. Avoiding confrontation, but nevertheless antagonistic towards them, officialdom reserves a superficial welcome for people of colour, migrants or women, among others.

At an institutional level, something similar could be seen in the gung-ho pursuit of aggressive tactics throughout the Brexit negotiations, during which concessions were demanded with little thought of any form of quid pro quo

Left to its own devices, the civil service is capable of creating procedures and regulations that contribute to an underlying malaise. This administrative hostile environment casts a shadow on those who are bound by or who enforce such oppressive rules. The Border Transit Operating Model offers a number of examples of the genre, such as the Common User Charge (CUC). 

DEFRA consulted with business leaders last summer, promising to share its findings in the autumn. For months there was talk of a “world class” system, but no operational detail that anyone could use for the day to day running of their business.

On January 19, Walthamstow MP Stella Creasy challenged the government’s wall of silence surrounding the Common User Charge. Here is how Hansard recorded the occasion.

[She told the House that]: “The charge is intended to apply to each consignment, whether it is one leg of lamb or a van full of reindeer and frogs’ legs. As 65% of lorries coming into this country carry multiple consignments, known as groupage, it is clear how expensive this way of applying the charge will be. 

“The Government have therefore chosen to fund the new border by imposing fees directly on businesses that import. The pledge that Brexit would be a bonfire of regulation turned into a smouldering pile of paperwork that will kill imports for small businesses. Can I just put it on the record  on behalf of British business — this is mad.”

Parliamentary Undersecretary of State of Environment Food and Rural Affairs, Rebecca Pow, replied: 

“We have provided further facilitation and guidance for importers using groupage models – the honourable Lady referred to groupage models, where a lorry delivers a whole lot of different models in one lorry – in terms of moving sanitary and phytosanitary goods into the UK, in order to make the system of certification more streamlined.” 

The word “consignment” is completely absent from the minister’s frankly incoherent reply, which is a thinly-disguised attempt to buy time.

Creasy then asked the government on February 8 whether a decision had been taken as to the rate at which the Common User Charge would be fixed and when such a decision might be published. Secretary of State for Environment, Food and Rural Affairs, Mark Spencer, replied on February 27 that an announcement would be made “imminently.” He added that: “This will help commercial ports in setting charges for their own facilities and provide traders with time to make the necessary finance, accounting and operational arrangements.” More stalling, more flannel, more empty words. 

The simple fact is that by the time the final workings of the CUC were revealed to the public, there was less than a month to do anything about it. For those who are still catching up with reality, the British government is rolling out a punitive tax on imported goods, starting on April 30.

For those who are up to speed with this news, there is a very real prospect that European traders will resent the British government’s crude attempt to monetise inland inspection facilities. The result will probably be a sudden and brutal drop in food shipments to the UK. 

So strange, yet true

The British government’s plans really are as mad as they sound. Try this example for size:

Fresh produce importer PML Seafrigo runs a private BCP at Lympne, near Dover. Company director Mike Parr picks up the story:

“PML Seafrigo has its own 24/7 border control post at Lympne, which is the closest point of entry to the Port of Dover (closer than Sevington), we have a dedicated transport and logistics hub for imported goods and yet our customers will still be charged the CUC even though they will not be using the Sevington facility. 

“The government is effectively asking businesses such as ours to collect taxes on their behalf. And the fact that this fee will be reviewed and updated annually by Defra is itself worrying, it could easily be increased in 12 months’ time. 

Parr is outraged by the casual way the government is abusing the trust of the country’s traders.

“The common user charge (CUC) is effectively another business tax that will be applied to each commodity line in a Common Health Entry Document (CHED). Although fees are capped – £145 for every consignment arriving via the Port of Dover or Eurotunnel –this is another expense for importers and retailers to bear, which will of course be reflected in further delays at the ports and another price hike for essential food items.

“What is particularly frustrating is that the fee is being levied for all fresh produce / plants goods passing through Dover or Folkestone – even if they don’t pass through the government controlled inspection post at Sevington.”

The question that most people would want an answer to is “WHY is the British government waging war on the very people that it claims to support? Any ideas, please add as a comment.

Brexit’s final nail in the coffin (1)

On April 30 the government will roll out the second phase of its Border Target Operating Model (BTOM). The result is likely to be total chaos on a number of counts. 

There is growing unease about the wall of silence surrounding  the computer system at the heart of the BTOM, called the Single Trade Window (STW). This will be the one and only way of getting data into the system. The final version*⁠1 of the BTOM guide, published on February 11 states: “ …the Single Trade Window could be fully operational in 2027.” 

There are a number of reasons why this could be awkward, but one will do. The STW calculates the aggregate cost of wear and tear caused by lorry traffic to roadways at ports. This operational detail is  used to set a levy called the Common User Charge (CUC). This is payable to HMRC within four weeks. While the STW sets a figure for Government operated ports, private operators were invited to fix their own charges, as they would do for anything else. There appear to be a number of sticking points.  Dover and Portsmouth,  the two busiest ports in the UK, both happen to be owned and operated privately.

The Common User Charge scheme comes from the European Directive 1999/62/EC, which was passed by the European Parliament and voted by the Council of 17 June 1999.  The EU framed it as a way of charging heavy goods vehicles for the use of infrastructure such as national road networks. It is no more than a rehashed EU pipe dream.

The scheme was never developed into a fully operational model in Europe. However, faced with the challenge of organising a system of robust controls on EU imports, the UK government saved a lot of  time and effort by reviving the Common User Charge. Stakeholders believed that new processes would cost a lot of money, so the UK government took them at their word and came up with a scheme to absorb their cash. Whitehall covered its back by saying that future costs would reflect how businesses are adapting their working practices and supply chains to the new rules.

The architects of the project assume that a budget of £330 million a year would cover roadway wear and tear arising from EU imports. On the basis of that figure, civil servants argue that the new system represents a  cost of 0.13% of all EU imports, then valued at £259 billion pounds. The value of such arguments cannot be guaranteed, but it is definitely an advantage to have two numbers, one of them large and impressive. However, these assumptions were never put to the test.

On Wednesday April 5, DEFRA unveiled a radical restructuring for the Common User Charge. Officials expect the CUC to be set between £20 and £43 per consignment: there are often multiple consignments in a load. The Government predicts that the new system will generate a 0.2% rise in the cost of food over three years.

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