Impact of Brexit on Borders and the Financial Services Sector

In 2021, amid the official end of the transition period, the UK border customs and the financial sector are, particularly under extreme burden.

The trade deal between the European Union and the United Kingdom is proven to have increased barriers and impacted UK financial services not long after the transition process ended

After one year of struggle, delays, and two Prime Ministers, the Brexit transition period was officially finalized on 31 December 2020.

In 2016, 52 percent of the UK population voted to leave the EU, most of whom were middle-aged, working-class citizens who lived in England’s countryside.

The pro-Brexit population of the UK were anxious about the free movement of immigrants and refugees and believed that they would steal their jobs and welfare benefits away.

The UK has left the EU, is no longer a party to the customs union and the single market with the bloc. Free movement and its benefits have ended and this is a heavy toll on UK businesses more than anything else.

Brexit is final, The UK is on its own, and UK businesses are already miserable

Less than a month has passed and the UK has broken ties with its main trade partner, the European Union. In this short time, the broken business ties have left the UK businesses in their worst nightmare.

The EU as the United Kingdom’s largest trading partner has taken 43 percent of the UK’s export in 2019.

The Brexit trade deal is leaving an impact on UK businesses all over the country. All daily services are delayed because firms are struggling to function in an unholy mess that Brexit created.

Business owners and exporters are saying that it is difficult for them to obtain transmit documents, the paperwork process and tariffs are unknown, and the lack of agents with the authority to issue the paperwork required for transmission makes it impossible for them to function properly.

Brexit Border Problems Are More of a Mess than an Issue

According to Bloomberg Author Joe Mayes agents are required to provide a financial guarantee which is often backed by a bank to cover taxes and duties on the relocation of the goods, but almost every agent has been committed.

Her Majesty’s Revenue and Customs (HMRC), the Government agency responsible for transit guarantee is largely delayed which has left many firms struggling.

HMRC said that it is aware of the complications that applicants are faced with and is looking forward to a solution.

Before Brexit, the majority of goods were transmitted between the UK and the EU without transit forms, but everything is different now and firms frequently encounter a series of long delays to go across the border due to faulty or lacking paperwork.

According to Steve Cock of the Custom House, at Ashford, Southeast England drivers were stuck at a truck park for several hours waiting to obtain transit documents and were often not allowed to cross the border and were being sent back.

Our experience over the last two weeks has been horrendous,” Tony Shally, managing director of Espace Europe wrote to Cabinet Office minister Michael Gove “The situation will only get worse.”

With the messy state of affairs restricting UK-EU trade, 20 percent of the smaller firms in the UK have suspended their exports to the EU.

Major UK firms are not invulnerable when it comes to the post-Brexit chaotic transit methods either. They deeply fear that with the continuation of this mess, their customers would take their multi-million-pound business elsewhere.

It is bold of us to consider the new transit situation a ‘method’, as Ben Moore, managing director of Sealite (UK) Ltd., says his firm’s shipments were held up due to lack of an unknown type of document called a T1 form.

We don’t even know what it is,” Moore said. “My shipping agent is saying ‘we can’t give you one.’”

Moore believes the new situation will cost his firm more clients, as the transit complications would eventually make them give up.

These clients will say: ‘Forget this, this is just too much,’” Moore said.

It’s just a mess.” He added.

Michael Gove, Johnson’s Cabinet Office minister, commented on the chaos at the UK borders, and he expected there to be “significant additional disruption” as a result of the changes Brexit made to customs norms in the coming weeks.

Gove said “So far disruption at the border hasn’t been too profound, but it is the case that in the weeks ahead we expect that there will be significant additional disruption, particularly on the Dover-Calais route.

It is our responsibility in government to make sure that business is as ready as possible, and hauliers and traders have already done a lot but we have to redouble our efforts to communicate the precise paperwork that is required in order to make sure that trade can flow freely.”

But is the UK Government’s solution?

The Government signed a ‘tariff-free’ trade deal with the EU on Christmas Eve. According to the agreement, Tariffs would be applied to goods, if more than 40 percent of the incomplete value of a UK firm’s product was not British, The Guardian reported.

Financial Services, not an exception to the rule

Over 80 percent of the UK economy is composed of Services and the EU is its largest market.

Before Brexit, the UK has shown that it intends to distance its financial institutions from the EU and has commenced the process to move financial operations.

Currently, the UK is obligated to seek authorization from EU member states’ authorities regarding financial services.

The EU-UK Trade and Cooperation Agreement (TCA) falls short on the issues of services and only suggests very little on the subject, excluding standard market access and the EU free-trade agreement non-discrimination obligations.

It is argued that the reason for this, is the fact that the main trade barriers in services are regulations, not tariffs. The EU, although imperfect, has the best cross-border services market integration.

The TCA lacks provisions such as the mutual acknowledgment of professional credentials such as Financial services and legal professions legislation to assist services trade within the EU.

And now the UK has an eye on Switzerland on a post-Brexit financial services deal.

As the UK has lost its EU privileges regarding financial services, firms now are faced with two options; provide an EU base or negotiate for regulations from individual countries.

The UK is pursuing the second option with Switzerland.

Whatever comes next, the UK has to work hard to regain what it had as an EU member state.

The UK was banned by the EU from trading in Swiss shares back in 2019 over stalled trade negotiations. This was estimated to have eliminated £1bn in trades from London every day since its enforcement.

Moving toward the next stage of cooperation talks between the UK and Switzerland could mean UK’s access to new markets could help the Kingdom survive Brexit.

But it is safe to say that the UK is a little bit too late to look for an alternative to the EU market as experts say Brexit would cost UK nearly 2 percent of its GDP over the next few years.

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