Brexit is finally done.

It will
leave the UK poorer
analysis by Hanna Ziady and Julia Horowitz, CNN Business
Updated 1740 GMT (0140 HKT) December 24, 2020…………..

London (CNN Business)The United Kingdom and the European

Union have agreed on a trade deal, closing the book on more than four
years of uncertainty over how the country would conduct business with its
biggest export market following Brexit.
UK companies are heaving a collective sigh of relief at retaining tariff-
free trade with a market of 450 million consumers that buys more than
40% of Britain's exports and provides more than half its imports.The
country left the European Union on Jan. 31 but had continued to enjoy its
previous trade privileges under transitional arrangements.

The deal spares the United Kingdom some of the direst potential
consequences from Brexit as it battles a crippling pandemic, and should
give a short-term boost to the economy. But the trade agreement will
still leave the country poorer at a time when it faces a jobs crisis and
the worst recession in more than 300 years.

"The United Kingdom has chosen to leave the European Union and the
single market, to renounce the benefits and advantages held by member
states," EU chief negotiator Michel Barnier told reporters. "Our agreement
does not reproduce these rights and benefits, and therefore despite this
agreement there will be real changes in a few days from now."

The new relationship is expected to lead to a long-run loss of output of

around 4% compared to remaining in the European Union, according to the
UK Office for Budget Responsibility, which produces economic forecasts
for the government. Leaving the EU's single market and customs area
means higher costs for UK companies, which could lead to higher
consumer prices and even more job losses, as well as reduced export
prospects, economists say.

Another drawback: The deal appears to mostly cover trade in goods,

where the United Kingdom has a deficit with its EU neighbors, and
excludes key service industries like finance, where it currently enjoys
a surplus.

close dialog

"The good news is that a disruptive and acrimonious 'no deal' has been
avoided," JPMorgan's Malcolm Barr wrote in a research note Thursday
before the deal was finalized. "The bad news for the UK, in our view, is that
the EU appears to have secured a deal which allows it to retain nearly all of
the advantages it derives from its trading relationship with the UK, while
giving it the ability to use regulatory structures to cherry pickamong the
sectors where the UK had previously enjoyed advantages in the trading
relationship."
Here are some of the major challenges facing the battered UK economy
when the Brexit transition ends on Jan. 1.

Truck are stacked along the M20 motorway as the border to France is closed on Dec. 22
in Sellindge, United Kingdom.

Trade barriers

UK companies are losing unfettered access to the European Union. While

a deal means that exporters have been spared the pain of having costly
tariffs slapped on their goods, new import and export declarations alone will
cost UK companies £7.5 billion ($10.3 billion) annually, according to
Britain's revenue authority.

Costs will rise rapidly if new customs checks delay goods at the border and
snarl supply chains, forcing factories to pause production. UK ports
are already gridlocked, partly as a result of stockpiling ahead of Brexit, with
industry groups representing retailers and food producers warning that
pressure will only increase when the transition period ends.
Even before France abruptly closed the border following a warning from UK
officials of a new, more infectious coronavirus variant, Honda was forced
to halt production at a major plant in England for three days in December
because it couldn't get the parts it needed.

While the government will phase in border checks over the coming months
to avoid choking off vital supplies, truckers and transportation companies
are among those warning of dire consequences. Rod McKenzie, head of
policy and public affairs at the Road Haulage Association, told CNN
Business earlier this month that supply chain hiccups could mean that
factories aren't able to work. There could also be "gaps on supermarket
shelves," he added.

That situation could be made worse by backups from this week. While
France has reopened ferry ports and the Eurotunnel rail link, thousands of
trucks remained stranded Wednesday morning with their drivers waiting for
the negative Covid-19 tests they need to travel. Supermarkets such
as Tesco (TSCDY) and Sainsbury's (JSAIY) were struggling to keep their
shelves stocked with fresh fruit and vegetables, and Toyota (TM) closed its
UK and French plants early for Christmas.

"The clock is still very much ticking for businesses," Jonathan Geldart,
director general of the Institute of Directors, a lobby group, said in a
statement Thursday. "Digesting what the changes mean in practice and
adapting, in the middle of a pandemic and the festive season while border
disruptions continue, is a huge ask."

Worker shortages
Britain's new immigration system, which takes effect in January, is
designed to reduce the number of unskilled workers coming to the United
Kingdom and end what the government describes as the country's "reliance
on cheap, low-skilled labor."

Immigration was a key issue in the 2016 Brexit referendum. As an EU

member, Britain was part of a bloc that allowed the free movement of
people. That meant companies were able to easily employ EU citizens in
sectors such as farming, social care and the National Health Service.
The number of EU workers coming to the United Kingdom has fallen
sharply since 2016, and employers are worried about labor shortages, even
though immigration from non-EU countries has been on the rise.

UK farms need 70,000 to 80,000 seasonal workers each year for a

successful harvest, according to the National Farmers' Union. The NFU is
lobbying government to introduce a seasonal worker program, without
which some farmers have warned that in the worst case crops could be left
in the fields to rot.

"Workers from outside the UK are absolutely vital to the success of our
horticultural sector," NFU vice president Tom Bradshaw told CNN Business
last week. "We are at a critical time in recruitment for many growers. As
freedom of movement ends on Dec. 31, [growers] still don't know where
they will recruit experienced workers from."

Loss of investment
Years of uncertainty over the future terms of EU trade have already
damaged the UK economy. GDP growth in the three years after the June
2016 Brexit referendum slowed to 1.6% as business investment stagnated,
according to analysts at Berenberg.

Greater clarity over Britain's future relationship with the European Union
could help. A survey conducted by EY in April found that 24% of investors
regard Brexit as a risk factor, down from 38% last year. According to EY,
there was a slight increase in the number of inbound foreign direct
investment projects into Britain in 2019, ending three years of decline.

"A deal [will] unlock significant investment in UK and support the recovery
once the ongoing coronavirus shock starts to fade," Berenberg economists
told clients Thursday.

But there's still a risk that foreign companies, including Japanese

carmakers such as Nissan (NSANF) and Honda (HMC), will no longer
view the United Kingdom as a launch pad into Europe.

That may already be happening. Chinese investment across the whole of

Europe has increased since the Brexit referendum but declined in the
United Kingdom, said EY. Global banks have been moving some of their
operations out of London to cities in the European Union.
Financial services snags
Worries that London would quickly lose its status as Europe's financial
capital to the likes of Frankfurt or Paris after the Brexit vote in 2016 have
turned out to be overstated.

The United Kingdom remains the world's biggest net exporter of financial
services, with its £60.3 billion ($81.6 billion) trade surplus in 2019 outpacing
rivals including the United States, Switzerland and Singapore, according to
a report by TheCityUK, a lobby group.

Still, international financial services firms have migrated £1.2 trillion ($1.6
trillion) worth of assets and relocated 7,500 jobs from Britain to the
European Union since the 2016 referendum, according to publicly available
data tracked by EY. Dublin, Luxembourg, Frankfurt and Paris have been
the major beneficiaries.

The European Union and United Kingdom have not yet struck a deal that
will give UK banks and asset managers access to European markets. EU
regulators are unlikely to let London keep the benefits of the single market
without its obligations.

"While a deal is welcome, financial and related professional services are

clear-eyed about the need for both sides to continue to develop the
relationship in services in the years ahead," Miles Celic, CEO of The City
UK, said in a statement Thursday.

Some outside countries receive preferential market access rights from the
European Union, a standard known as "equivalence." The level of market
access is worse than what the United Kingdom currently enjoys, but it's the
best the country can hope for once outside the European Union.

Major banks say they have prepared for Brexit, and the new terms of trade
with the European Union won't disrupt their operations while negotiations
continue over equivalence.

Breakthrough: UK and EU reach post-Brexit trade

agreement
By RAF CASERT and JILL LAWLESSDecember 25, 2020
BRUSSELS (AP) — Just a week before the deadline, Britain and the European Union
struck a free-trade deal Thursday that should avert economic chaos on New Year’s
and bring a measure of certainty for businesses after years of Brexit turmoil.

Once ratified by both sides, the agreement will ensure Britain and the 27-nation bloc
can continue to trade in goods without tariffs or quotas after the U.K. breaks fully
free of the EU on Jan. 1.

Relief was palpable all around that nine months of tense and often testy negotiations
had finally produced a positive result.

The Christmas Eve breakthrough was doubly welcome amid a coronavirus pandemic
that has left some 70,000 people in Britain dead and led the country’s neighbors to
shut their borders to the U.K. over a new and seemingly more contagious variant of
the virus circulating in England.

“We have taken back control of our laws and our destiny,” declared British Prime
Minister Boris Johnson, who posted a picture of himself on social media, beaming
with thumbs up.

European Commission President Ursula von der Leyen said: “It was a long and
winding road, but we have got a good deal to show for it.”

“It is fair, it is a balanced deal, and it is the right and responsible thing to do for both
sides,” she said in Brussels.

The EU member countries and the British and European parliaments still need to
vote on the agreement, though action by the European body may not happen until
after the Jan. 1 breakup. Britain’s Parliament is set to vote Dec. 30.

France, long seen as Britain’s toughest obstacle to a deal, said the uncanny
steadfastness among the 27 nations with widely varying interests was a triumph in
itself.

“European unity and firmness paid off,” French President Emmanuel Macron said in
a statement.

And German Chancellor Angela Merkel said that unity will now probably result in all
the EU nations backing the deal: “I am very optimistic that we can present a good
result here.”

It has been 4 1/2 years since Britons voted 52% to 48% to leave the EU and — in the
words of the Brexiteers’ campaign slogan — “take back control” of the U.K.’s borders
and laws.

It took more than three years of wrangling before Britain left the bloc’s political
structures last January. Disentangling the two sides’ economies and reconciling
Britain’s desire for independence with the EU’s aim of preserving its unity took
months longer.

The devil will be in the detail of the 2,000-page agreement, but both sides claimed
the deal protects their cherished goals. Britain said it gives the U.K. control over its
money, borders, laws and fishing grounds and ensures the country is “no longer in
the lunar pull of the EU.”

Von der Leyen said it protects the EU’s single market and contains safeguards to
ensure Britain does not unfairly undercut the bloc’s standards.

If Britain were to quit the EU with no agreement governing trade, the two
sides would reinstate tariffs on each other’s goods.

Johnson’s government acknowledged that a chaotic no-deal exit — or a “crash-out,”

as the British call it — would probably cause gridlock at the country’s ports,
temporary shortages of some goods and higher food prices. The turmoil could also
cost hundreds of thousands of jobs.

To avoid that, negotiating sessions alternating between London and Brussels — and
sometimes disrupted by the pandemic —- gradually whittled differences between the
two sides down to three key issues: fair-competition rules, mechanisms for resolving
future disputes, and fishing rights.

The EU has long feared that Britain would slash social, environmental
and state aid rules after Brexit and gain a competitive advantage over the
EU.Britain denies planning to institute weaker standards but said that having to
follow EU regulations would undermine its sovereignty.

A compromise was eventually reached on the tricky “level playing field” issues. That
left the economically minor but hugely symbolic issue of fishing rights as the final
sticking point, with maritime EU nations seeking to retain access to U.K.
waters where they have long fished.

Under the deal, the EU will give up a quarter of the quota it catches in U.K. waters,
far less than the 80% Britain initially demanded. The system will be phased in over 5
1/2 years, after which the quotas will be reassessed.

The U.K. has remained part of the EU’s single market and customs union during the
11-month post-Brexit transition period. As a result, many people so far have noticed
little impact from Brexit.

On Jan. 1, the breakup will start feeling real. Even with a trade deal,
goods and people will no longer be able to move freely between the U.K.
and its continental neighbors without border restrictions.

EU citizens will no longer be able to live and work in Britain without visas -- though
that does not apply to the 4 million already doing so -- and Britons can no longer
automatically work or retire in EU nations. Exporters and importers face customs
declarations, goods checks and other obstacles.
British manufacturers and traders welcomed the certainty provided by
the deal. But economists said other parts of the economy — especially
Britain’s huge services sector — would be left out in the cold.

David Henig, a trade expert at the European Center for International Political
Economy, said Jan. 1 marked “the end of seamless trade between the U.K. and the
EU. ”

“And the difference that a trade deal makes is not going to be obvious to most people
from that,” he said. “It is the new barriers that people will notice much more.”

The U.K.-EU border is already reeling from new restrictions placed on travelers from
Britain into France and other European countries because of the new version of the
coronavirus sweeping through London and southern England.

Thousands of trucks were stuck in traffic jams near the port of Dover on Wednesday,
waiting for their drivers to get virus tests so they could enter the Eurotunnel to
France. British supermarkets said the backlog will take days to clear and there could
be shortages of some fresh produce over the holiday season.

Despite the deal, there are still unanswered questions about huge areas,
including security cooperation between the U.K. and the bloc — with the
U.K. set to lose access to real-time information in some EU law-
enforcement databases — and access to the EU market for Britain’s huge
financial services sector.

Von der Leyen said she felt “quiet satisfaction,” but no joy, now that the torrid Brexit
saga that has consumed Britain and the EU for years is finally almost over.

“I know this is a difficult day for some, and to our friends in the United Kingdom I
want to say parting is such sweet sorrow,” she said.

Johnson, who staked his career and reputation on extracting the country
from the EU, said Britain will always be a strong friend and partner to
the bloc.

“Although we have left the EU, this country will remain, culturally,
emotionally, historically, strategically, geologically attached to Europe,”
he said.

___

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Customers in Europe hit by post-Brexit
charges when buying from UK…
The Guardian,7th January, 2021.
Customers in Europe buying products ranging from furniture to
pet food from UK companies are receiving unexpected bills for
VAT and customs declarations or finding household names have
stopped shipping to the continent, as post-Brexit trading rules
bite.
“We bought a €47 [£42] shelf from Next for our bathroom,” said Thom
Basely, who lives in Marseille. “On the morning it was supposed to be
delivered we received an ‘import duty/tax’ demand for over €30, like a
ransom note. It came as a complete surprise.”

A Frankfurt resident who ordered cycle clothing from a UK company was

sent a tax and customs demand for €102, while a woman in the
Netherlands who bought trousers in December “with no issues” faced a €40
bill for two more pairs ordered in January.
Chris Hickson, a retired logistics and freight forwarding expert living
in France, said many people may have been surprised because “they
believed the tariff-free trade deal negotiated between the UK and EU meant
there would be no extra charges”.
Since the end of the Brexit transition period, however, continental
customers must both complete a customs declaration for goods imported
from the UK – a procedure generally performed by transporters, for which
consumers will be charged, frequently up to €20 per declaration – and pay
national VAT.
Other European customers have been informed that such iconic
British retailers as the luxury food store Fortnum & Mason were
unfortunately “unable to send any products to European
countries at this current time, due to Brexit restrictions”.
Yes even Fortnum and Mason can no longer sell to Europe. A British
legend. pic.twitter.com/ihyA4B1Npt
— Julia De Cadenet (@JuliadeCadenet) January 6, 2021

Customers of the department store chain John Lewis, also popular with
British citizens living in the EU, who value its “never knowingly undersold”
price match guarantee and reliable customer service, have also been
disappointed.

Until December, the retailer offered EU delivery for many items on sale
through its website, including clothes. But anyone requesting shipping
to Europe is now greeted by a page stating: “We are no longer taking orders
for international delivery.”
Some retailers, such as George at Asda, have promised no additional
charges, but several international platforms including Asos have halted
deliveries to Europe from their UK sites, instead directing buyers to
national versions in, for example, France.

David Martin, who lives in the Creuse region in central France, said he
switched his regular order for dog food from the pet supplies company
Zooplus to its Irish site after being told the UK platform was no longer
accepting orders from the continent.

Northern Ireland facing food supply disruption over Brexit, MPs told

An “import fees deposit”, meanwhile, is now automatically added to orders

from continental Europe placed via Amazon’s UK website, nearly doubling
the cost of some items and making it significantly cheaper to find an EU
alternative.

Hickson said fees for customs declarations were usually collected by the
international shipping companies, such as DHL or UPS, responsible for
transporting the goods, with customers notified of the charge – and obliged
to pay – before delivery.

“Many vendors are not yet aware that this is the case, or if they are may not
be able to say in advance what the bill will be,” he said. “VAT will depend on
the category of goods and their value.”

Despite the tariff-free deal, customs duties will apply to goods

ordered from the UK that do not originate from Britain. Goods
ordered from and manufactured in the UK should not attract
customs duty, but products ordered from the UK worth more
than that €150 and shipped from outside Britain will.

A leading French consumer website cited the example of a pair of trainers

ordered from a UK website for £270 but manufactured in and shipped from
China, saying customs duty of 16.9% and 20% French VAT would bring
their cost to about £378.
And while continental buyers are no longer charged British VAT on UK
purchases, they must now pay local VAT in their country of residence -
although this is waived for orders under €22 until 31 July. Platforms such
as Amazon are entitled to collect continental VAT on orders worth less than
€150.

“It’s a hugely complex situation,” Hickson said. “My recommendation to

anyone in the EU looking to buy goods in the UK is: don’t order
anything until you know what the charges and VAT will be. And
be patient. This should all sort itself out eventually, but it’s going
to take some time.”
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