UK timber businesses need more clarity on Brexit to feel confident about future
This article is by TTF Managing Director David Hopkins. It originally appeared in the October 2018 edition of Structural Timber Magazine.
The Brexit clock is ticking away, yet with just six months to go there is still very little clarity on what UK business should be doing to prepare.
The no-deal option – which even the most die-hard Brexiters once dismissed as lunacy – is now considered a viable possibility and the temptation for all sides to keep playing the “blame game” for this situation – more than two years after the EU referendum in June 2016 – is strong. There seems little desire for compromise from either side of the debate.
This is clearly not what the UK needs. At this stage of the negotiations, we should have already thrashed out the broad terms of the agreement, giving certainty to the economy and time for business to prepare.
This is the priority of the Timber Trade Federation (TTF) and we are working hard to ensure that our Members are prepared for the future. The task is not easy, but our efforts are starting to pay off.
At the start of the Brexit process, we identified several areas over which the timber supply chain needed quick and simple clarity: the EUTR & FLEGT framework; product standards and regulations (particularly the Construction Products Regulation); and then a list of issues related to our membership of the Customs Union, from tariffs to VAT payments, to plant health inspections and so on.
In each of these, we have made progress. Firstly, the EU Timber Regulation. This was something that the UK and EU timber industries lobbied in favour of ahead of its introduction in 2013. It is an entirely sensible, business friendly regulatory structure which forces companies to conduct thorough risk assessments on their international supply chains outside of the EU. It reduces the risk of illegally logged material entering the market and allows importers to run their business according to their appropriate levels of risk.
The TTF did not want to see any back-sliding or removal of this framework, as we are proud of our record in improving legality and sustainability in the UK market.
So, we have lobbied to keep it. And, at the Timber Industries Parliamentary Reception in February of this year, the Minister of State for Defra Therese Coffey, announced that the Government would retain the framework and that it had been fully incorporated into UK law.
Similarly, a lot of our concerns over common products standards have been addressed. As an affiliate member of British Standards Institute (BSI) we, like many other industry bodies, have been supporting their position to continue having common product standards with CEN (European Standards body) and ISO (international standards body) instead of reinstating old and withdrawn British Standards applying only to the UK market.
This is a basic exercise in reducing complexity and making business life easier. Common standards minimise barriers to trade by avoiding conflicting national standards and duplication. Brexit fanatics may be unaware, but having a single standard European framework has resulted in a fall in the number of differing national standards within Europe from 160,000 in 1980 to 20,000 today.
These common standards are quite autonomous from the EU too and the UK is one of the leading countries in developing them. It is important we maintain a UK voice in this development, particularly over the Eurocodes for construction.
The biggest hurdles though, remain over the Customs Union. Currently, the UK imports over 10 million cubic metres of timber per year, the vast majority of which comes from Europe. As part of the Customs Union, all of this clears ports immediately, with no need for customs checks, enabling an efficient ‘just-in-time’ style business model.
However, if the UK leaves the customs union, then, potentially, this all changes. Timber could be subject to customs checks adding time and cost to businesses. These checks are wide ranging, from basic assessment of import and shipping documents through to checks of the plant health regime. Ports are already over-stretched in terms of human resources, so adding extra strain will not be welcome.
This would also cause delays, during which time the timber will also have to be stored, causing further financial implications as the cost for space and storage is estimated to increase considerably.
On top of this, the current VAT regime is linked to the Customs Union. Under current rules, companies can spread the payment of VAT on EU imports so that goods are sold before having to pay the tax. This eases cash flow, especially for small businesses. However, under the terms of the Taxation Bill that was originally put before Parliament, once the UK leaves the EU and its VAT area, this would no longer be possible and the 20% VAT charge will be charged upfront.
The TTF has calculated that our members would face a £1 billion Brexit VAT bill under this scenario.
We have been lobbying hard on these issues, arguing that the customs and VAT systems need to be preserved to avoid unnecessary cost and time.
Thankfully, on the VAT point the Government has seen sense. In the first tranche of papers released to describe the Governments planning for a “no-deal” scenario, the Government has listened to our concerns and said that the VAT system will be preserved, providing a small dose of relief to all concerned [read more here].
However, on the other non-tariff barriers relating to Customs Union membership, we are still in the dark. The prospect of delays, build ups, and increased costs is very real and, until such time as we get clarity from the negotiations, there is little we can do to plan ahead.
All of this could be avoided if our own Government could stop fighting amongst itself, and focus on outcomes instead of point scoring. In the meantime, the TTF will continue to ensure our Members concerns are heard by Government.
We know we want a profitable, growing timber industry. If only the Government could clearly describe what it is trying to achieve….