One in four Greater Manchester businesses are reporting a ‘negative’ impact from Brexit, with VAT concerns and red tape costs dominating a ‘dramatic’ rise in requests for help.
Both the Chamber and the Federation of Small Businesses say firms here are confused by the trading changes that came in at the start of 2021, including criticism that guidance from the government remains too vague.
Local authority and business leaders hope the issues are teething problems, but the region’s political lead on economic issues has warned there ‘could be far more significant issues’ further down the line in relation to the movement of workers.
The latest economic dashboard reported to the Greater Manchester Combined Authority, monitoring resilience in the face of both Covid-19 and Brexit, includes the results of a monthly survey of businesses.
Carried out between December 18 and January 18, and therefore including the first few weeks of Britain’s new trading relationship with the EU, it shows ‘a large increase in businesses reporting a “negative” impact from EU exit, with 25.3pc of firms reporting a negative impact, an increase of 18pc from the previous report’.
“This is reflected by Greater Manchester Chamber of Commerce, who are reporting a dramatic increase in the number of Brexit and trade deal related enquiries,” it says.
“Whilst issues being raised are often very specific to individual firms, the two most common topics are VAT and documentation.
“Firms are reporting that changes to the forms they use for transporting goods are resulting in some shipments being rejected or being unable to be certified.
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“Firms are also reporting that information available on gov.uk is too generic to be useful.”
The Chamber told the M.E.N. that enquiries relating to the consequences of Brexit are ‘coming in thick and fast’.
Subrahmaniam Krishnan-Harihara, head of research at the Chamber, said he suspected many businesses had believed a deal with the EU - secured at the eleventh hour by Boris Johnson in December - ‘would ensure continuity of old arrangements, at least in some form’.
“We still believe that the full implications are yet unknown, and more challenges will emerge in the next few weeks and months,” he added.
“While it is true that the UK government had been warning about changes, there was little clarity on what those changes would be, and the steps needed to adapt to those changes.
“Adding to the difficulty is the impact of Covid-19. There has been a historic collapse in demand and cash positions. At a time when every sector has been battered by Covid-19, it is understandable that businesses could not afford significant investment in Brexit preparation.
“Overall, we expect the outcome of Brexit to be negative because it has increased the cost of doing business and resulted in some loss of custom, especially for those firms which have exposure to EU markets."
The Federation of Small Businesses, which represents more than 4,000 small and medium-sized firms in the conurbation, said that the ‘long-winded’ Brexit process has been an ‘enigma’ for many companies.
Spokesman Robert Downes said Britain’s exit had attracted ‘so much noise, it was difficult for decision makers to sort fact from reality’.
“In fact most businesses remained in the dark about what it would mean for them until very late in the day due to the eleventh hour deal that was struck, which really didn’t help,” he said.
“Not surprisingly, we are starting to see post-transition issues feeding through, with confusion around VAT, overseas orders tailing off, admin and handling charges have taken some by surprise, and there’s been issues with freight capacity.”
While these were hopefully ‘early bumps in the road that can be ironed out’, extra support was needed in the short term, he said.
“The work of looking through the detail of the agreement is still continuing, but what we really need from here is tangible, targeted support, including £3,000 transition vouchers that small firms can spend on the training and advice required to navigate a new trading relationship with our biggest export market," he said.
“This support would make the road less ‘bumpy’ and shorten the time frame in which businesses need to make the transition less awkward.”
Greater Manchester relies on EU exports more than the national average, with Germany its biggest export destination, followed by Ireland.
Discussing the impact of Brexit at the latest GMCA meeting, council leaders said they hoped that issues with red tape around exports would prove to be initial teething problems.
Bury council’s leader Eamonn O’Brien said the town hall had not in the first instance had many queries raised with it by companies.
However further investigation had shown that ‘under the surface’, firms had simply been trying to resolve them directly with business partners and hauliers.
There turned out to be ‘serious and significant concerns’ among companies, he said, ‘one about the bureaucracy but also about the increased costs of moving goods’.
“Inevitably there will be some teething problems, but additional costs - permanent additional costs - were being built into the system of exports,” he added.
“And all that does is make our products in Britain less competitive; makes our businesses in Bury in GM less stable; and all at a time when we know we’re facing economic challenges from lots of different perspectives.
“So whilst I’m not going to be someone who predicts complete doom and gloom, I do think we have to face a reality that our businesses who export to countries in the EU are finding it difficult.”
Coun O’Brien gave an example of one firm trying to process a sale of just £7 to Ireland, but finding itself ‘spending several hours’ filling out paperwork when previously the process would have taken seconds.
“There are concerns about clawing back VAT from countries, some predicting it could take years before VAT was returned to businesses, which massively impacts things like cashflow,” he added.
“So we do need to keep looking at this, we do need to be very serious about the consequences of it.”
Stockport council leader Elise Wilson, who leads on the economy for Greater Manchester, said some of the red tape and increased costs were hopefully ‘teething problems’.
But she said that as yet, the issues been raised related largely to the export of goods - as opposed to any problems that may yet arise around the movement of workers.
“As the economy opens and people are more free to move around, what impacts are going to happen because of this new relationship with the EU?” she said.
“We risk sleepwalking into bigger problems as people start to move around.”
The government has been approached for comment.
