Warwickshire firm's EU export costs triple following Brexit
WHEN the UK left the European Union, many businesses involved in exports expected some teething problems, extra paperwork and increased costs.
But not many would have expected their distribution costs to increase by around 300 per cent and days of delays getting goods to customers in France, Germany and other countries on the continent.
It is, according to one Alcester-based business, either going to reduce profitability or make UK firms uncompetitive against rivals from the EU or those with cheaper costs in India and China.
Calgavin, which researches and engineers heat transfer solutions for a range of industries, was shocked to see its costs soar for shipments to the EU.
Its shipments now have to stop at distribution centres in Europe rather than going straight to a client. At each stop there is a cost involved and a delay, which is being made worse by the Covid pandemic.
When 90 per cent of your business is exported, as it is for Calgavin, rising distribution costs can have a significant impact.
Alex Codreanu, Calgavin’s sales proposals manager, put together some figures which compare 2020’s costs to those post-Brexit. A comparable delivery to France has increased from £455 to £1,085 and takes up to two days extra to reach the client. To Germany the costs have increased from £645 to £1,160, with up to a ten-day delay on the previous system. And sending goods to the Netherlands has seen costs rise from £404 to £1,225 (more than 300 per cent) with up to a seven-day delay.
“Any business that ships loose items – part loads – in a truck to the European Union will have to fill in a lot of documents because it will not be sent direct to that particular client as it was a year ago,” Alex explained. “They now have to go to a depot where the clearance is being taken into account and then delivered to the final client.
“Covid is definitely not helping and there are a lot of delays because of Covid and I’m not sure how much of that is going to be ironed out in a couple of months’ time, but there are issues which will still be there after Covid has been cleared.”
He estimates that Covid is responsible for 20 per cent of the extra costs. That will still leave Calgavin facing a financial burden in a competitive market and something will have to give.
Managing director Martin Gough said: “We can only invest either from grants, which are rare but welcome, or from the profits from the company. If our profits are going to be eaten away, then we won’t be able to invest as much in science and technology and we won’t be able to grow the company because we will simply be losing to lower-cost countries.
“To actually add to the overheads of any company in the UK is absolutely crazy. It’s tight enough without doing that and this is just bureaucratic stuff.”
He added: “The adding of all this paperwork, which was not there before, is for selling the same product to the same people – there has to be a way to take all that paperwork away and do it on an electronic basis before it goes abroad.”
What the government is doing to help businesses with costs and paperwork is unclear.
A UK government spokesperson told the Herald: “We know that some businesses are facing challenges with specific aspects of our new trading relationship, and that’s why we are operating export helplines, running webinars with experts and offering businesses support via our network of 300 international trade advisers.
“Businesses in Warwickshire can also benefit from our £20m SME Brexit support fund to help small businesses adjust to new trade rules with the EU.”
Asked whether the government was looking at how costs could be reduced and whether technology will be playing a part, the government’s spokesperson went silent.
However, Stratford MP Nadhim Zahawi was more vocal, saying the government was working to make things smoother.
He said: “I am sorry to learn of the additional costs and difficulties Calgavin is facing. Whilst Covid-19 is undeniably a factor in this, I recognise that there may now be additional costs involved when sending items to and receiving items from the EU and UK, including VAT charges, customs duties and handling fees.
“The government has always been clear that the UK would leave the EU single market and customs union. This was a manifesto commitment. Changes have therefore taken place at the border between Great Britain and the EU. New customs processes have been put in place and, as the prime minister has acknowledged, there will be misunderstandings as people adjust to the new measures.
“It is good news that the cabinet office is now reporting that freight movements are close to normal and that disruption at the border has been minimal.
“Nevertheless, the government will continue working to minimise any costs and streamline these new processes to make them as smooth as possible for businesses.”