2020 was a challenging and difficult year for the World and not least in that, the UK leather industry.
The impact of the Covid-19 crisis on trade, saw UK businesses losing orders, money and regrettably, employees. These difficulties were compounded by the uncertainties over Brexit, with the future of our trading relationship with our largest trade partner left undecided until the very last minute. However, on the 24th of December, the UK and EU agreed a trade agreement, averting the very damaging prospect of the ‘no-deal’ scenario.
While the struggle with Covid-19 continues, the finalising of the trade agreement between the UK and the EU has brought some welcome relief. The full implications (and possible complications) of the agreement may not become apparent for some time, but there were a number of positive outcomes for the UK leather industry.
The Agreement establishes zero tariffs or quotas on trade between the UK and the EU, where goods meet the relevant rules of origin. This means there will be no tariffs or quotas on the movement of goods between the UK and the EU. Furthermore, the agreement includes provisions which reaffirm, incorporate and build upon WTO commitments and principles, facilitate trade, and address non-tariff barriers (such as import and export licensing restrictions). It also ensures that trade remedy measures are investigated and applied in a proportionate and transparent manner.
The Agreement includes reciprocal commitments not to reduce the level of protection for workers or fail to enforce employment rights in a manner that has an effect on trade. The provisions are clear that both sides have the freedom and ability to make their own decisions on how they regulate – meaning that retained EU law will not have a special place on the UK’s statute books.
Non-regression on Environmental Protections
The Agreement includes reciprocal commitments not to reduce the level of environmental or fail to enforce its laws in a manner that has an effect on trade, including cross-economy greenhouse gas emission reduction targets. The ‘non-regression’ clause will cover areas including: industrial emissions; air emissions and air quality; waste management; the prevention, reduction and elimination of risks to human health or the environment arising from the production, use, release or disposal of chemical substances.
The Agreement gives both sides the freedom to set their own climate and environmental policies in the way most appropriate to achieve their aims. The domestic supervisory bodies of the UK and EU will cooperate to ensure effective enforcement of their respective environmental and climate laws.
Sanitary and phytosanitary measures
The objectives here are to protect human, animal and plant life or health facilitating trade between the UK and EU and ensure that sanitary and phytosanitary measures do not create unnecessary barriers to trade. However, raw hides and skins will now require a Health Certificate to cross the border between the UK and the EU.
Essentially, the trade of hides, leather, chemicals and machinery with the EU will continue on almost the same basis as before Brexit, i.e. tariff-free and on an equivalent regulatory basis. Furthermore, there will be no erosion of the standards on animal welfare, the environment, chemicals, etc., which make UK-manufactured leathers some of the best in the World for CSR requirements as well as quality.
However, all UK businesses trading to the EU will be faced with additional costs and bureaucracy with regard to exports and imports. It is essential that you understand and prepare for these additional requirements and there are a number of resources available to guide you through that process, e.g. https://www.gov.uk/export-goods. Consideration will need to be given to cross-border financial arrangements such as VAT payment and recovery. Although the agreement does not provide specific detail on these requirements, large amounts of secondary legislation has and will be generated to cover these areas.
While an agreement that provides for tariff and quota-free trade with the EU is very welcome, it is clear that trade with the EU will become more costly and more complicated. The introduction of the new points-based immigration system may also impact on our industry, and others, that have benefited from the free movement of workers from the EU. For many companies, these workers have filled gaps in the workforce that simply could not be filled by UK workers but will now fail to meet the requirements imposed by the new regime.
The process of the implementing the agreement is ongoing and Leather UK is still in very regular conversations with the Department for Business, Energy and Industrial Strategy (BEIS). BEIS are very keen to understand the challenges face by industry as a result of Brexit and have been very helpful in addressing the concerns and questions that we have had.
We are publishing all Brexit-related updates for your businesses from the Department for Business, Energy and Industrial Strategy (BEIS) on our web page here. It's a very long list, and we are providing them in the order that they are received. You may have to look very closely for the information you require. This page will be curated with relevant information as often as possible.
Please do not hesitate to contact us should you have any questions on the new arrangements with the EU.