Brexit

Clearing the mists of Brexit?

Clearing the mists of Brexit?

BLOG · BY TTF CEO DAVID HOPKINS · 20 Jan 2020

With the general election now over, Brexit is certain to go ahead, but our future trading relationship with Europe may still remain uncertain. However, there is time to clear the mists.

Artist Henri Matisse once defined happiness as a ‘good day’s work…illuminating the fog that surrounds us’.  In the case of Brexit, that fog still hangs like a persistent haar, or sea fret, as it’s known in some parts, over our timber importing sector.

There is little chance as yet of clearing those mists, with so much still needing final clarification as regards to customs documentation, phytosanitary checks, the possible knock-on effects at ports, and the consequent potential for interruption to construction supply chains. With over 90% of the timber used in the average British home coming in from the EU, and with the extent of Britain’s own timber resources being singularly unable to replace more than a proportion of that volume, we are still living through ‘interesting times’.

The slogan ‘getting Brexit done’ heralds only the first stage in a concentrated period of unsettled markets which will consume business minds throughout the remaining months of the year. Politically there are moves afoot to persuade the government that the transition period should be extended, to give more time to reach a deal.  However, the government’s astrolabe has its course firmly set upon exiting on 31st December this year. It is still entirely possible that the UK will leave the EU at the end of the transition period this December in a ‘no deal’ scenario. The Timber Trade Federation is therefore continuing to advise members to prepare for this distinct possibility.

We issued our latest guidance document on a no deal Brexit in October and that advice still largely stands. With the EUTR now already adopted into law as the UK Timber Regulation, in a no deal situation, timber importers bringing wood in from EU countries will become ‘Operators’ (instead of their current status as ‘Traders’). This change will encompass a vast majority of Timber Trade Federation members and those builders’ merchant chains who conduct their own timber importing activities.  It will have immediate impact on their due diligence procedures.

Under UKTR, Operators must collect and demonstrate much more detailed due diligence procedures. They are obliged to ensure there is ‘negligible risk’ of illegally- harvested timber entering their supply chains. In the case of Timber Trade Federation members, under the TTF’s Responsible Purchasing Policy, Operators must also submit their due diligence actions to independent third-party audit, ensuring that customers can continue to buy ‘Timber you can Trust’.

Attempting to ameliorate the administrative burden of extra customs documentation for importers bringing in wood from the EU, the government launched a £16 million fund in October 2019. This is to help companies to train their staff in creating and processing the millions of additional customs declarations that will be needed, and in creating any necessary IT systems. Transitional Simplified Procedures (TSPs) for Customs were also launched last year by HMRC, with the aim of enabling companies to clear their goods through customs and, essentially, to pay any duties latterly found to be needed after the importation process has completed.  The impact upon companies in handing these extra transactional flows through their financial accounts remains uncharted waters.

With the integrated nature of today’s construction supply chains, the process of Brexit in our own and other industries is analogous to unpicking and reversing our role in the industrial revolution. As many more customs officials and agents will also be needed, deal or no deal, HM Treasury and HMRC also launched a new UK Customs Academy last August, to train up thousands of new officials. With the UK being the second largest timber importer in the world behind China, they will have their work cut out, especially in the bigger timber importing ports in Hull and in Scotland. The UK is also a significant destination for timber and wood products from the Republic of Ireland. It still remains to be clarified by government exactly how the border with Ireland, as an EU country, will work going forward.

Another patch of mist still to clear is EU nationals’ perception of living in the UK post-Brexit, and whether they will see a more welcoming and better economic future back in the EU. The construction industry and its supply chain is acknowledged as a major employer of EU citizens’ labour and the Federation of Master Builders amongst others have been keen to stress this to government. The members of the Freight Transport Association are perhaps a less visible yet vital element in the supply chain, without whom the timber sector could not provide merchants with their just-in-time deliveries.  The FTA recently revealed that there are 343,000 EU nationals working in British logistics firms, and currently more than 53,000 vacancies to be filled.  They warn that the loss of yet more drivers could “see vehicle movements and the supply chain as a whole come to a standstill”.

Yet there are lanterns shining brightly through the mists of Brexit, albeit they are few and far between. The focus provided by a transition period ending in December, plus a government focussed on returning value to communities which ‘lent’ it their support in December’s election, may power up the house-building market for the best part of another year.  Some construction indices are already beginning to head upwards with this in mind, following a slump in December.

Our TTF UK Softwood Conference, at which merchants and suppliers come together to discuss the global state of trade, takes place on 4th March in London. Exploring changes in demand, policies on housing and regional variations across the UK, plus issues of climate change, competing materials and the China-America trade war, will enable our members and their merchant guests to be as well prepared as possible for whatever lies ahead.  As novelist Joseph Conrad once put it, ‘it is not the clear-sighted who rule the world. Great achievements are accomplished in a blessed, warm fog’. We look forward to exploring with readers that ‘warm fog’ pervading this year of sea change in our economy.

This article was first published in the Timber Trader