Article 50(2)

29th March 2017

Brexit: New tariffs, what new tariffs?

Now that Prime Minister May has written to the EU, triggering Article 50(2) of the Treaty on European Union, Brexit moves one step closer and SME’s slowly begin to wonder, “how might this affect us”? For your average local family business, the main areas of concern will probably be:

  1. How further exchange rate movements might further increase their supply chain costs,
  2. How new tariffs might also increase supply chain costs and/or make their goods and services more expensive in overseas export markets and hence supress demand,
  3. How higher UK interest rates would increase costs of borrowings,
  4. Less generous (currently EU funded) tax reliefs, such as R&D Relief,
  5. The economic shock caused by change and uncertainty, and how this might dampen demand for their goods and services.

Dealing with the second of these points, which gets a lot of air time in relation to negotiating a new trade deal with the EU, we perhaps have less to worry about than we feared. According to the WTO survey in 2015, the average import tariff (excluding agriculture) from a non EU country selling into the EU was only 2.3%. We have already seen and dealt with much bigger cost rises over recent years through oil price variations and the effect of the EU referendum decision upon exchange rates.

Global trade liberalisation over recent years has, helpfully, already eroded away this potential barrier to trade.

Blog entry by: Ian Piper.

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