Leaving the EU will add 30% to the price of an average import to the UK and cost the typical SME importer £163k a year through increased shipping costs, duties and taxes, red tape and border delays, according to a new study.
The report, from International courier ParcelHero, suggests a so-called ‘Brexit’ will result in an immediate and significant decline in trade with countries inside the EU.
The report, Delivering Brexit: The True Cost of Leaving the EU, indicates that a typical £150 purchase from the EU would cost Brits around £195: an increase of £45 or 30%.
The report comes ahead of the EU referendum in the UK, held on Thursday 23 June 2016.
ParcelHero based its findings on its own international delivery data and how non-EU countries in the continent, such as Switzerland and Norway, currently trade with EU countries.
ParcelHero warns there will be an average 5%-9% added to the price of an item in duties, and VAT of around 20% to pay (only reclaimable for those who are VAT registered).
Additionally, it warns there will be increased transport costs, as the UK becomes a less competitive market for international couriers, and new ‘customs clearance’ charges from global carriers: typically around £15.
It’s all in the jeans
David Jinks MILT , ParcelHero’s Head of Consumer Research, said: ‘It’s not just consumers who will suffer; businesses will too. Our report reveals that the typical SME engaged in importing from the EU will be spending around £163k extra annually, including duties and taxes, if we leave the Union.’
The report warns UK exporters will face a mass of new red tape shipping to the EU. Customs forms with proof of origin for every shipment will be required; and the resulting duties payable by receivers mean EU businesses will be three times more likely to prefer to trade elsewhere within the Union than with the UK.
Jinks added: ‘The cost of consumer goods could rise by around 32% if the UK follows the model European non-EU member Norway; and 58% if it follows the favoured Swiss model. A typical pair of branded jeans that costs £56 in the UK costs £71 in Norway and over £80 in Switzerland. That difference is not just down to increased duties and transport costs; but they certainly don’t help.’
Once outside the EU, the UK is unlikely to qualify for the many favourable trade agreements negotiated by the union with key countries and markets around the world, the report claims.
The case for Brexit?
The report emphasises the case for UK remaining in the EU. However, it does assess a number of benefits that might be gained for shippers of parcels, SMEs and small businesses were Britain to leave the EU.
While the EU has reduced average tariffs from 5% in 1990 to 1% in 2011, those on footwear and clothes remain high, which makes it difficult for more efficient producers outside Europe to export to the EU. Taking control of these tariffs may encourage trade with a wider variety of nations.
This means withdrawing from the EU altogether could potentially reduce the prices of imported goods from outside the EU, on the assumption that the UK reduced tariffs to below EU levels.
The report looks at how Britain might opt to have a unilateral free trade policy. This assumes the UK would be as success in brokering comparable agreements on its own as the EU has been.
In addition, the EU is not as important to British trade as it used to be, and continuing turmoil in the Eurozone would make it even less so.
Out of the EU, the UK would be free to establish bilateral trade agreements with fast-growing export markets such as China, Singapore, Brazil, Russia and India through the World Trade Organisation, the report states.
The Vote Leave website, ‘Vote Leave Take Control’, claims: ‘Instead of a uniform harmonisation that is hard to fix, a reformed Europe could work on the basis of mutual regulatory standards, combined with global standards where appropriate.’ It argues the current annual cost of EU regulation to the UK economy is £33.3bn.
Vote Leave also says that by leaving the EU the UK regains an independent vote in world trade negotiations at the World Trade Organisation.
The role of TTIP
The report also looked at the controversial Transatlantic Trade and Investment Partnership (TTIP) deal being discussed between the USA and the EU.
Outside of the EU, the UK will not be included in the planned Transatlantic Trade and Investment Partnership (TTIP) between the US and EU, aimed at removing most customs duties.
This would mean, for example, British cars exported to the US would still face a 2.5% tariff that will no longer apply to EU cars. And, unless the UK were to react unilaterally, import duties of 10% on imported American cars would remain in Britain, but be abolished in the EU. It is also likely that very many other British exports such as fuel and chocolate could also be at a disadvantage if TTIP abolishes tariffs on those products.
“Renegotiating 19,000 tariff codes”
Adds David: ‘If we were to plough our own furrow completely, leaving the common market and setting our own tariffs, that would also mean moving outside the EU’s Common External Tariff and setting new duties on 19,000 individual tariff codes: a guaranteed recipe for increase red tape and delays.’
The report also disproves the claim that the UK’s SME businesses can simply switch from the EU, our main trading partner, to, for example, the BRIC nations. Typical ParcelHero SME business users shipped more items to the Republic of Ireland alone last year than the whole of Brazil, Russia, India and China combined. The report also found that British CKD car part sets attract duties of 125% in India.
Concludes David: “The message is clear, when faced with new duties and red tape on UK goods, EU-businesses will stick with their union partners – at the expense of a go-it-alone Britain.”
Read the full report at: www.parcelhero.com/brexit