Higher transport costs and tariffs, plus increased red tape, means the BRIC nations are no substitute for the EU post-Brexit, warns ParcelHero.
The idea that UK businesses will be encouraged by leaving the EU to develop links with the so-called BRIC nations – Brazil, Russia, India and China – has been criticised by the international delivery experts ParcelHero .
The London-based global courier is warning that, even if the BRIC nations were growing at the rate they were previously, they could not replace the European Union (EU) for the majority of UK businesses, particularly SMEs. ParcelHero’s new report – Delivering Brexit – reveals it would cost the average UK regular importer/exporter (excluding ‘one man bands’) around £163k extra annually, including duties, to trade beyond the EU’s borders.
Says ParcelHero’s Head of Consumer Research, David Jinks MILT: ‘The argument sometimes deployed by those who want out of the EU is that leaving would, somehow, encourage British manufacturers to concentrate on exporting to the likes of the so-called BRIC nations. But how much would it cost UK businesses to turn their attentions beyond the EU to these new markets, and how competitive would UK products be?’
David warns that products shipped from outside the EU are typically between 20% and 30% more expensive. This is because there would be an average 5%-9% added to the price of an item in duties, plus VAT of 20% (only reclaimable in you are VAT registered), plus increased transport costs: BRIC nations are a less competitive market for international couriers. Internet shoppers would also be likely to pay ‘customs clearance’ charges on their goods from courier companies: typically around £15.
While they are talked of as key markets for Britain’s major industries, the UK’s SMEs and internet retailers do not benefit from significant trade with the BRIC nations. Currently SMEs and marketplace traders using ParcelHero send just 0.25% of total overseas shipments to Brazil, 0.14% of shipments to Russia, 1.13% to India and 2.1% of items to China.
Says David: ‘The combined total for the BRIC nations is less than ParcelHero’s shipments to the Republic of Ireland (a member of the EU) alone (6%). That’s a vanishingly small base for building a whole export policy on.’
A recent survey by ParcelHero partners FedEx revealed a slightly stronger BRIC market: 16% of UK SME exporters trade with China and 10% with Brazil. These are higher numbers than ParcelHero’s own figures but small beer compared to the 96% of SMEs who trade with Europe.
The reason why small businesses are less keen to do trade beyond the comfort of the EU is not hard to fathom:
Brazil is currently suffering economic and political difficulties;
Russia does not allow courier shipments to private addresses, only business ones;
India has some steep tariffs: 125% for a CKD car kit for example;
China has tough customs clearance procedures and its growth rate is slowing.
Concludes David: ‘What do these figures tell us? That UK products will struggle to be competitive in many overseas markets. And further, were the UK to de-link its duty structure from the EU’s common external tariff, other nations considering trading with us might find an independent UK’s unique tariff structure equally bewildering and unattractive.’
For information on the issues facing UK businesses shipping to the EU post-Brexit see www.parcelhero.com/brexit