Let’s cut the EU red tape and get trading!
Red tape, rising costs and complex rules are pushing small firms out of EU markets, according to new research.
A report by the Federation of Small Businesses (FSB) has revealed that three in ten (34 per cent) of SME traders expect to reduce or stop EU trade altogether if current rules don’t change.
Meanwhile, five in ten (45 per cent) expect to maintain current trading levels and fewer than one in ten (six per cent) see an opportunity to grow trade with the EU under the existing arrangements.
The FSB says that is because paperwork is making EU trade harder to justify, with one small business reporting spending more than half of its time on trade admin alone.
Compliance costs are also eating into margins, with over a third facing expenses of more than £5,000 a year.
Disruption at the border is common, with firms reporting goods being turned away or held up, resulting in unpredictable delivery times and damage to customer relationships.
The report also shows that six in ten small firms trading with the EU have faced significant barriers. These include taking equipment overseas when travelling for work and different regulations between the UK and the EU.
Of those importing and exporting goods, 85 per cent reported problems – most commonly with customs documentation, physical inspections and product marking and labelling rules.
Elsewhere, VAT is proving a major stumbling block, with 75 per cent of small firms that have engaged with EU VAT systems reporting significant difficulties and 41 per cent saying they have not been able to find clear guidance.
The FSB is now calling for ‘urgent action’ to make trading with the EU easier and more attractive.
It wants to see mutual recognition of product standards between the EU and the UK – which 31 per cent of small firms think would benefit their business.
The organisation is also calling for a single digital customs system so businesses only have to submit paperwork once, instead of repeating the same information over multiple forms.
And it says a new UK-EU de minimis (low-value trade) deal would cut costs on small parcel shipments, so firms can sell into the EU without being hit by duties and fees on every order.
Its wish-list also includes delivering the sanitary and phytosanitary (SPS) trade deal for food and plants by mid-2027 to remove border checks and paperwork, speeding up deliveries and reducing delays for exporters.
The FSB wants to see export grants of up to £2,000 to help small firms cover the upfront costs of entering new markets and the scrapping of EU requirements for ‘costly’ VAT middlemen so UK firms can sell into the EU without paying for local representatives to handle their tax.
FSB policy chair Tina McKenzie said: “With growth at the top of the agenda, now is the time to get EU trade working for small firms.
“Small firms are not short of ambition but they’re being worn down by a system that feels stacked against them. Many want to grow into EU markets, but don’t have time to be swallowed by paperwork, creeping costs and delays that put hard-won customer relationships at risk.
“The EU should be a natural market for our small firms as it’s so close and accessible. When it works, it opens doors, drives growth and helps businesses thrive. For some firms, those EU orders are what keep things going when it’s slow at home.
“The demand is there and the opportunity is clear, so it’s a frustrating shame that many are currently questioning whether it’s even worth the effort at all.
“When sending a small order costs more than its worth, or a delay risks losing a customer, something has gone wrong.
“This isn’t complicated – a de minimis deal, an SPS agreement, simpler VAT rules and our other recommendations could unlock so much potential. They would take pressure off small firms and give them the breathing space they need to grow.”
• To discuss any issues raised by this article please contact me on 01772 430000
