Pricey Beef Lasagne, Mattresses Burned Twice Among Brexit Risks

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(Bloomberg) -- Burning mattresses twice. Hundreds of pounds in extra costs to export a beef lasagne. Own-brand chicken curry hit by tariffs.

These are some of the potential consequences that lie in store for Britain when it starts its new economic relationship with the EU in 2021, unless the U.K. and the bloc find solutions during this year’s trade talks, according to the Confederation of British Industry, which represents 190,000 businesses.

The scenarios outlined by the CBI, in a report titled “The Red Tape Challenge” published Monday, would occur under a limited free trade agreement between Britain and the EU. They are a sign of the economic disruption that would flow even if Prime Minister Boris Johnson achieved his chief negotiating aim of securing a zero-tariff, zero-quota deal with the bloc akin to that enjoyed by Canada.

“All efforts must be made in these talks to save exporters time and money, avoiding new paperwork, costs and delays,” Carolyn Fairbairn, director-general of the CBI, said in an e-mailed statement. “This will protect the U.K.’s global competitiveness, jobs and growth.”

Most of the upheaval would come from companies having to comply with two separate regulatory regimes, filing new customs paperwork and losing easy market access for services. Avoiding this disruption will require comprehensive deals and cooperation, the CBI said.

The CBI’s examples arising from regulatory divergence -- which was touted by Britain’s chief negotiator David Frost as a major benefit of Brexit last week - include:

  • Car manufacturers spending 350,000 pounds ($454,000) to 500,000 pounds per vehicle type approval to comply with both standards.
  • A cosmetics firm spending 2 million pounds to register its shampoos, conditioners and dyes to conform with separate U.K. and EU rules.
  • Mattress-makers setting fire to their products twice, in the event that rules for flammability resistance aren’t deemed equivalent between the two sides. The same would apply for oven gloves, children’s clothes, toys tested for breakability and cars being crashed into walls to test air bags, the CBI said.
  • A poultry and egg farmer setting up two separate production lines and raising flocks separately, so they can sell to both U.K. and EU markets.

Such disruption could be averted if Britain and the EU agreed to mutual recognition of their standards and assessment processes, the CBI said.

On customs, the CBI identified:

  • At least 300 pounds of extra cost selling a beef lasagne to the EU, because of the need for customs declarations and export health certificates. Export health certificates could be avoided if the U.K. and EU were to agree mutual recognition of food regulations, the CBI said.
  • A 10.9% tariff on a U.K. retailer’s “own brand” chicken curry ready meal, even if the U.K. and EU had signed an FTA. Given the product contains chicken sourced from Thailand, and assuming trade rules akin to the EU-Canada agreement, the product would not be deemed to originate from the U.K., and wouldn’t qualify for zero-tariff treatment.

For services, the report warns of:

  • Qualifications of U.K. professionals not being recognized by the EU, meaning workers such as auditors having to complete a full re-qualification in an EU member state if they wished to work there.
  • Disruption to transporting goods between the U.K. and EU, because an agreement isn’t signed allowing hauliers to operate freely through both territories.

©2020 Bloomberg L.P.

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