But in recent years, a formidable force has emerged as kryptonite to this entrepreneurial optimism: Brexit. The word itself has become synonymous with uncertainty and disruption, casting a shadow over the ambitions of countless small and medium-sized enterprises (SMEs). As an entrepreneur navigating the business environment, I have encountered the disillusionment and discouragement that many of my colleagues share. This is a recurring sentiment in conversations with fellow business owners who, like me, are grappling with the negative impact of Brexit on their businesses.
Running my sustainable business, Beira, has become increasingly difficult due to the impact of Brexit. First, complex changes in the supply chain have created additional paperwork, delays, and even backlogs of goods that can be held to ransom. Secondly, what I call the “Brexit tax” imposes a 34% import VAT and customs duty on collections imported from Italy. Prior to VAT registration, it was not possible to claim a refund. Even with the current 20% rebate, it is having a significant impact on cash flow, which is a key element for a sustainable small business. Importing the same product from China costs just 21%, highlighting the disproportionate burden placed on companies trading with European partners.
Most importantly, these challenges have almost reduced my sales in Europe. In March alone, he lost 3 online sales due to customers canceling orders due to his 34% additional cost associated with importing our products from the UK. Understandably, European customers see no value in these additional fees and they are a deal breaker for them. Similarly, his Alistair McAuley, co-founder of the renowned textile and wallpaper brand Timorous Beasties, emphasized: But European customers aren’t stupid either. This additional tax has no value to them. It disappoints them. ”
Founded in 1990, Timorous Beasties has flourished in the UK and US, and was also gaining traction in Europe before Brexit. Their success was evident as they chose to open a showroom in Germany. Following advice from government and financial experts, they set up a German company, secured special space, hired staff, and engaged a German accounting firm to provide services.
2019 brought positive steps to overcome the uncertainty of Brexit and an optimistic outlook for Europe’s future. But fast forward to February 2024, two years of the COVID-19 pandemic added to the challenge, and Timorous Beasties faced an inevitable decision. Despite initial efforts, the company was forced to close its German showroom and suffered significant financial losses. Setting up a business in a new and unfamiliar country is difficult enough, but the complexities of Brexit make it nearly impossible, according to McCauley. Administrative obstacles at every stage are severely hampering business. Despite having a company in Germany, many additional costs were incurred, including import taxes and customs duties, which the brand was forced to pass on to European customers.
Mr McCauley stressed that the only way to avoid these challenges is a complete overhaul of the business model, with the move of manufacturing from the UK to Europe or beyond. However, such a solution would have wider implications for the UK’s textile and manufacturing industries.
Even closing the showroom proved to be a cumbersome process, costing around £3,500 to return their products (150 items) to the UK. He explained: It’s embarrassing that there is no real support or strategy to help your business. ”
The company also participates in prestigious interior shows across Europe. Previously, transporting products for display in Paris for short periods of time cost about three tanks of gas in our company’s van. After Brexit, these costs skyrocketed to him £5,000 per show and the paperwork became extremely onerous. All items, even seemingly trivial items such as cable ties, must be meticulously sorted down to their country of origin. As a result, the financial burden and bureaucratic hurdles associated with displaying products have increased, putting additional pressure on the sales process.
These barriers extend to our European distributors, impacting their ability to sell our products. Increased paperwork and costs reduce profit margins. As a result, British brands, which are proudly made in the UK, become less attractive due to lower profitability and increased administrative burden. I try to find a glimmer of hope in every article I write, but honestly, amidst these challenges, it’s a difficult task. While we accept that the ideology and vision expressed by those who voted to leave are very different from the current reality, we will still be grappling with the aftermath of what can only be described as ‘chaos’.
The impact on entrepreneurs undermines not just them, but all of us, and our economic prospects for the future. But as Alistair MacAuley wisely suggested, ‘nothing stays the same forever’.
So, in the face of this adversity, let us make a serious appeal to the governments in Edinburgh and Westminster to explore the concept of change by design, a deliberate effort to forge better business relations with Europe . Through proactive measures, strategic thinking and a collaborative approach, we can overcome challenges and pave the way to a more promising future for UK SMEs in Europe.
