Brexit: things won't be as easy as they were, but are better than they could have been

A last-minute deal struck on Christmas Eve between the UK government and the EU ensured that Britain's exit from the single European market and Customs Union on 31 December 2020 would avoid the bilateral imposition of tariffs and quotas on goods traded between the EU and UK.

The deal ensures the continuation of tariff-free trade in goods between the EU and UK.

However, because the UK has now left the EU, the single market and the Customs Unions, it is now formally a third country; new regulatory burdens have been imposed on exporters and importers. These include new notifications, certificates and permits.

The UK government has stated that it wishes to see trade in goods with the EU continuing with as little new friction as possible; many of the new obligations imposed on traders can be dealt with online. However, with ten new IT systems in place and many practical questions remaining unanswered, it is likely that several weeks will pass before there is a return to the smooth flow of goods across the English Channel. Unresolved issues will probably work themselves out in practice over time. However, for every exporter, the first load or two sent over will raise the worry that some new administrative procedure has been carried out incorrectly, and may even lead to goods being refused entry.

Until the end of last year, a Polish trader needed just two pieces of paper to accompany goods to the UK. As of 1 January, there is now be a need for up to 11. The greatest number of new procedural burdens falls on the food sector, where phytosanitary and/or veterinary certificates are now required. Country-of-origin certificates will be needed for all goods entering the UK tariff-free, to prove that a given product has come from the EU (with which there is a free-trade agreement), rather than a product that is largely from a non-EU country. Without such a document, customs duties will be levied at the appropriate tariff.

Big changes to VAT accounting have taken place too. Polish exporters selling to the UK need to have an EORI (Economic Operator's Registration and Identification) number, and will have to pay the VAT on the exported goods in Poland before sending them to the UK. For exporters who are used to selling to countries outside the EU, this will not be anything new, but for those who trade exclusively within the borders of the single European market, it will mean additional administrative burdens.

A simplified version of the full notification system will be in place until 1 July 2021, to give traders to get their systems ready.

The new Goods Vehicle Movement Service, set up to track road hauliers' lorries on their way to the ports, should ensure that there are no major hold-ups at the Channel ports. However, fines will be imposed on drivers and owners of trucks entering the county of Kent without having notified the GVMS of their intention to cross the border.

The fact that a free-trade agreement was reached before the 31 December deadline has lifted the value of the pound. Had the UK left the single market and Customs Union without a deal, the pound would have suffered a significant depreciation. As it is, sterling is likely to recover some of the value it has lost since the 2016 Brexit referendum, which will make the UK market more attractive for Polish exporters than it has been over the past few years.

In the long term, the UK will remain an interesting market for Polish exporters. As a country where manufacturing industry accounts for only 8.6%* of the value added to GDP (in the case of Poland it is 17%)*, the UK is condemned to importing the goods which it doesn't make. Polish firms continue to have an advantage in cost-competitiveness over their competitors in Western Europe; the fact that they may enter the UK tariff-free is excellent news. All that's needed now is to understand and learn how to cope with the new red tape facing exporters, and the UK's status as Poland's third-biggest export market need not be threatened.

Poles who are resident and hold Settled Status in the UK may continue to live and work there as before; Polish workers who come to the UK on short-term contracts are now subject to the Frontier Worker permit scheme [details here]. Polish citizens not entering the UK to work or study can still do so on valid ID cards (dowód osobisty) until 1 October 2021, after which time a passport will become necessary.

Members of the British Polish Chamber of Commerce are publishing helpful articles covering various aspects of doing business with the UK after Brexit; this compendium of information (which will grow in size over the next few months) may be found here: http://bpcc.org.pl/pl/brexit

The British government's website with a full list of links to pages explaining the new rules can be found here: https://www.gov.uk/eubusiness

[* World Bank, 2019 data]