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More propaganda from the FT

ft
Written by Catherine McBride

The FT is determined to convince its video viewers that the UK needs to rejoin the EU. This time they are claiming we need a Veterinary Agreement to reduce border friction – we don’t. Only 0.5% of UK exports would ever need this, and we have continued to export beef and dairy products to the EU since Brexit, without one. So, what is the FT’s real agenda?

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I wrote an article in March asking if the FT would ever get over Brexit. Their response seems to be a resounding ‘No’ as they have just released a 25-minute video entitled We need to talk about Brexit.

The FT chose to interview a Micro company with under 10 employees, a Small and Medium-sized Enterprise (SME) and a beef farmer but not any of the UK’s major exporting companies. The UK’s largest exports are: Business services; Machinery and transport equipment; Financial Services; Travel; Chemicals; Telecoms, Computers and information services; Miscellaneous manufactures; Material manufactures; Insurance and pensions; and Fuels. So, should we be concerned with the issues of these three companies and are their complaints really Brexit related?

The SME

Of the two companies the FT chose to interview, 3P Innovation, builds customised equipment for the pharmaceutical industry. In the FT interview, its founder, Dave Seaward, makes the outrageous claim that: ‘We’ve lost about half our growth as a direct result of Brexit.’

But a mere 6 weeks ago on 14th February 2024, 3P Innovation lodged its full accounts with Companies House, for the year ending 31st July 2023. This document is incredibly upbeat and claims that: ‘Importantly, the Pharma Equipment side of the business saw sales growth of over 38%.’ and that ‘this is the second consecutive year of double-digit growth’ with sales up by 11%. They have also increased their headcount by 20%, and claim their ‘sales pipeline is the healthiest it has ever been’. This doesn’t sound like a company that has ‘lost half its growth’.

Their annual report includes a list of the principal risks and uncertainties faced by the business, Brexit was not one of them. They list technical risks from first-of-its-kind machinery, commercial risks dominated by the high probability of project cancellation at short notice, interest rate risks on their borrowings and supply chain risks due to their reliance on Asian semiconductors suppliers – something they intend to mitigate by broadening their global supply chain. But nothing about Brexit. And luckily 3P has  limited currency risks because ‘the vast majority of 3P revenue and costs are in sterling.’ Yet Seaward claims on the FT’s video that he has to deal with German rules, Italian rules and Spanish rules and needs an office in Europe ‘so that I can put a CE mark on a machine’ even to sell it to non-EU customers.

It is hard to equate the company’s annual report with Seaward’s claims in the FT video, I wonder if his comments were cut badly by the video editor or taken out of context. Surely their audited company accounts are more trustworthy than the FT video.

It is possible 3P took a sudden and unexpected turn in the last 6 weeks, despite having the standard ‘Going Concern’ clause at the end of their annual accounts, but that would be hard to blame on Brexit as the company was obviously doing very well in July last year, three and a half years after Brexit. Reading 3P’s company accounts made me very sceptical about his other complaints in the video. But I regret that ‘Made in the UK’ doesn’t hold the same reverence that it did before the UK joined the EU.

The Micro company

The other company interviewed by the FT was a micro company set up in 2005, called Everything Dinosaur, it’s a private mail-order company whose products are made by manufacturers ‘based all over the world’.  They don’t have accounts lodged at Companies House, but they did give an extensive interview to the Cheshire and Warrington Local Enterprise Partnership in December 2022, where they claimed:

“It would be easier to tell you the territories we don’t sell to now rather than those we do! But we are doing great business in the US, Canada, Europe, Australia and Brazil. Our latest trading figures show that turnover has increased by 15% with exports now accounting for 40% of all our sales.” (my emphasis)

As Everything Dinosaur was mostly distributing and re-exporting models ‘manufactured all over the world’ in 2022, they should be used to dealing with customs forms. They already had a US-based website in 2022 allowing US customers to buy in Dollars, and they were already using local companies to sell into the Dutch and Brazilian markets. So, I am rather sceptical about their complaints about Brexit as they clearly weren’t reliant on EU customers in 2022. Their main complaint was dealing with the EU’s complex VAT rules and the cost of postage.

EU VAT was designed to give the EU machine an income, but it allowed each country to exempt some products and control the total rate charged, provided the EU got its unfair share. Brussels is trying to harmonise VAT and has reduced the number of exemptions and reduced rate products each country can have so Everything Dinosaur may find their VAT problem is soon sorted by the EU itself. (The new CBAM tariff payments will also be an EU ‘own resource’ and I cynically believe this is part of the reason they are imposing it.)

As for their complaint about postage costs to Australia being greater than the product value, firstly this has nothing to do with Brexit and secondly, if this is true now, how did they export to the US, Canada and Australia in 2022? If their exports have fallen since 2022, this is more likely to be due to the recession in most of the EU and the UK in 2023 rather than Brexit. Let’s face it, who doesn’t cut back on dinosaur models during a cost of living crisis, or a recession?

Everything Dinosaur claims that the Australian Trade deal hasn’t helped their business, but they seemed to have missed the point of the new trade deals. The trade deal with Australia was not designed to help micro-companies re-export novelty items that were probably made in China and under the Rules of Origin requirements would not even be eligible to benefit from the elimination of Australian tariffs.

The UK’s largest goods exporting companies are Rolls Royce, Jaguar Land Rover, BAE systems, JCB, GSK, Diageo, Nissan, Toyota, AstraZeneca etc. These are some of the companies that should be benefiting from the trade deal. The video would have been more interesting if the FT had thought to interview one of them.

British Chamber of Commerce

However, the FT did interview Shevaun Haviland from the British Chamber of Commerce (BCC). Although she admitted that 60% of businesses were telling the BCC that ‘this year was harder than the year before’, she didn’t try to pin this on Brexit but blamed ‘changing rules’. But bizarrely when asked about what needs to change in the UK’s relationship with the EU, although she acknowledged the VAT problems faced by UK exporters, her number one ask was a “Veterinary Agreement”.  Considering the very small amount and small value of UK meat and dairy exports compared to our machinery, chemical and manufacturing exports, this seems like a very strange choice.

And if you think that is being harsh on the UK’s farmers, it isn’t. Farmers generally don’t export their own products but sell their animals to abattoirs and meat processing companies who may export some of the meat, but most UK meat production is consumed domestically. Exports of meat and meat products, of all types, in 2023 were only 0.28% of total UK exports by value. While dairy product exports were only 0.23% of total UK exports. Together they make up just over a half of one per cent of our exports. No one gives up their ability to create their own regulations for 0.5% of their exports. Is the British Chamber of Commerce mad? One thing we don’t need is a veterinary agreement.

Haviland also seems to be confused about how the EU’s Carbon Border Adjustment Mechanism (CBAM) will affect UK exporters. The EU’s website only mentions forms that must be filled in by importers, not exporters and the CBAM only applies to iron and steel, cement, fertilisers, aluminium and hydrogen, and items made wholly of these products. In the case of steel that would be items such as pipes, screws and springs. There is a list of products affected on the link.

Haviland also wants mutual recognition of qualifications and more flexibility in the time people can stay in different countries. Assuming the BCC is only concerned with business travel, the UK’s Department for Business and Trade believes we already have this access for business travel. According to their website, the UK EU Trade and Cooperation Agreement ensures that UK firms can continue to access the EU market, including as business travellers and cross-border services suppliers or investors and should be treated ‘no less favourably’ than EU businesses or other 3rd country competitors.

But her comments do make trading with the EU sound very difficult. And I guess this is the FT’s intention in order to get more alignment with EU regulations by promoting the myth that the UK is a major goods exporter. Even though goods exports are now less than half of total UK exports and only about 10% of UK companies export anything anywhere.

Aligning with the EU would just hurt our imports and as we are a country that relies more and more on imported goods and the EU is one of the world’s least competitive import suppliers, aligning with their regulations would be a very stupid thing to do.

Most of the food produced on UK farms is consumed in the UK, and the additional demand is filled with imports from both the EU and the rest of the world. UK food imports aren’t evenly spread throughout the year, we import much more food from the Southern Hemisphere and equatorial countries in the winter and eat our own produce and imported EU produce in the Summer.

A beef farmer

But to reiterate the need for EU alignment, the FT chose to interview a farmer working in another tiny UK export industry – beef. The world’s top beef exporters: Brazil, India, Australia and the US all measure their beef exports in millions of tonnes, the UK barely exported 100,000 tonnes in 2023. We do produce almost a million tonnes of beef each year, we just don’t export it, we eat it. And then we import another 300,000 tonnes to fill the excess consumer demand.

The FT’s chosen farmer was Hugh Broom, who until recently did a Farmers Weekly podcast, has entered a Defra Sustainable Farming Incentive scheme and hosts a battery storage enterprise on his farm, all according to the National Farmers Union website – he was a speaker at their conference in February this year. (The FT mentioned none of this.)

Broom acknowledges that losing the CAP Basic Payment Scheme has caused him and most UK farmers to focus on productivity, and he claims he is producing more off his farm now than ever before. As he says ‘we’ve sort of got on and adapted’. This is exactly what farmers in Australia and New Zealand had to do in the 1980s and 90s when they lost their subsidies. Now both countries are major agricultural exporters, although this is unlikely to happen to Britain as UK farmers still have the environmental subsidies to fall back on, which effectively pay UK farmers to not farm, so rather than improve their productivity some UK farmers will stop producing at all.

Unfortunately, Broom, like many UK farmers, believes the UK is a major agricultural exporter. It isn’t. We are major agricultural importers. And we need to be able to import food from multiple suppliers, so that we are not trapped into exclusively buying from the EU. This will be even more important if the weather continues to change.

Broom mistakenly believes that the EU is our major market and so we would ‘be utterly crazy to rip up the rule book’ but he is wrong. The UK is the UK’s biggest customer, by far. And our rules should be designed to suit UK consumer preferences, UK farm sizes, UK climates, UK pests, UK seasons, and UK soil types. The UK has never ‘raced to the bottom on standards’ and had considerably better animal welfare standards than many EU countries while we were EU members.

However, the UK doesn’t have the highest standards in the world, as Broom and so many UK farmers have heard repeated so many times, they now believe it. UK standards are very similar to New Zealand and Australian standards, although their different climates and herd sizes require different rules, they aim for similar outcomes. For example, I doubt any Australian cattle would ever be kept in a shed as Broom’s are, having to stick their heads through the railings to eat hay from a trough outside the shed. But Broom happily lets the photographer film his cattle’s accommodation without fearing a visit from the RSPCA because this is standard practice in the UK although it would kill most cattle in Australia. Different countries house their animals differently to suit their climates, not better or worse, just different.

Altruistically, Broom suggests that the UK would be ‘throwing away’ its lamb export trade unless we align our regulations with the EU. He dismisses any fears about the UK becoming rule takers as just ‘give and take’ but he doesn’t seem to realise that would mean the UK gives and the EU takes. Broom will probably be surprised to know that the UK exported a mere 85 thousand tonnes of lamb last year, even less than our beef exports. But while France is still our largest customer for lamb, we also exported sheep meat to Ghana, Kuwait, Hong Kong and Canada. And these markets are growing.

There is a real threat to UK sheep farmers, but it is not from the new Australian and New Zealand trade deals. New Zealand already had a tariff-free quota of over 100,000 tonnes for sheepmeat that has never been filled. No, the threat to UK sheep farmers will come from France and Spain who have both greatly increased their sheep production and exports over the last ten years and unlike Australia and New Zealand, their lambing season is the same as the UK’s.

To survive UK sheep farmers must look for new export markets, not hope that  French and Spanish farmers will go away if we align with EU regulations. One Brexit opportunity on the horizon for UK sheep farmers will be the trade deal the Department for Business and Trade is negotiating with the Gulf Cooperation Council.

Broom knows little about trade. He doesn’t even know that the whole point of trade is to open your market to more efficient producers. He claims that the UK’s trade with Australia was ‘next to nothing’ without ever questioning why that would be or whether that was always the case. He seems oblivious to the massive tariffs the EU added to most of the agricultural goods Australia and New Zealand once exported to the UK and that they now export all over the world.

Broom may be interested to know that in 2023, UK car exports to Australia more than doubled in value, and exports of other transport goods also increased. Broom falsely claims that the Australian and New Zealand trade deals were rushed through probably because he mistakenly believes the UK’s main exports are agricultural, but as I have already mentioned they are a tiny fraction of UK exports which are predominately business, financial and insurance services and machinery, motor vehicles, aircraft parts, oil and gas and chemicals. The UK imports agricultural goods, mostly from the EU because of the high tariffs and small quotas that we still apply to many non-EU food imports. It will be 15 years before Australia and New Zealand have the same access to the UK market as other EU food producers have now.

An FT journalist

Peter Foster, an FT journalist is also interviewed in the FT’s video, and he is also pushing the need for a Swiss-style veterinary agreement. As he is a journalist, I would have expected him to know how little meat and dairy products the UK exports. I also thought he would know that Switzerland is landlocked by EU and EEA countries, so all its food imports come via the EU even if they were not produced there. I also would have expected him to know that the EU hates the Swiss EU multi-agreement system. Something it has repeatedly tried to force Switzerland to change. The chances of the EU offering the UK a similar deal would be extremely low or it would be a trojan horse for full dynamic alignment, before total capitulation to membership, acceptance of the Euro and its associated Tier Two problems.

But Foster was salivating at the thought of the UK becoming a rule-taker again under an EU Veterinary Agreement, even though meat exports are not a ‘key sector of the economy’ and of negligible value. He forgets that the UK is a large net importer of EU food, not an exporter. We don’t need to follow EU rules to buy their food. We can buy what we like, and not buy the things we don’t like: such as horse meat, or foie gras, or fur, or whatever else doesn’t meet our animal welfare standards.

Foster says a lot of silly things in this video: he has no idea how investors manage risk and uncertainty, he seems to be unaware of Germany’s present economic problems, doesn’t know how the Rules of Origin in the TCA work, he doesn’t know about the semiconductor shortage that hurt both UK and German car exports, he doesn’t understand CBAM, nor how Intrastat counts EU trade and he never questions why tiny Netherlands is Germany’s largest EU import supplier. (Has he really never heard of the Rotterdam effect, or does he think we haven’t?) Nor does he seem to know that the refined oil that makes up about 20% of Germany’s imports from the Netherlands was once UK crude oil exported to the Netherlands for refining into diesel.

Although he does admit that alignment with EU rules doesn’t ‘get you access’… ‘you still have to show up with a piece of paper’. He claims the cost of this piece of paper will cut the UK out of EU supply chains. That doesn’t seem to have been a problem for the UK’s exports of aircraft parts, which increased by 19% in 2023 to $12.3 billion with EU countries buying 60% of UK exports, up from 57% in 2022. The UK is still the world’s largest aircraft part exporter, Germany is the second largest with exports worth $7.4 billion in 2023 but their exports only increased by 7%. I doubt Foster will try to blame this on ‘border friction’ or the cost of a ‘piece of paper’.

I can only imagine Foster’s shock when he discovers HMRC now has a digital customs platform, accepts electronic trade documents and that Chanel Tunnel’s Border Pass technology was allowing hauliers to clear customs and cross the channel in 2023 at the same speed as before Brexit.

The political adviser

But the scariest part of the FT’s video came at the end when Rachel Wolf a former adviser to David Cameron when he was Prime Minister said:

‘If we are talking about carbon trading, the degree to which food standards are aligned, I think the public neither know nor care at all. So, I think it’s going to be very easy to align to certain standards in the EU. I don’t think we should be naive that we can do lots of things by stealth that totally remove the fundamental trade-offs and questions about Brexit.’

This sounds like the exact opposite of taking back control, and for no obvious upside. Hopefully Wolf won’t be advising the new Labour Government.

The conclusion

We don’t need a Veterinary Agreement, we don’t need to follow the EU’s CBAM regulations either, if the EU wants to make their VAT rules so complicated it deters 3rd country imports – let them. This is why we left – to get away from the EU’s crazy regulations that hurt consumers and protect inefficient EU producers. Encouraging more efficient companies should be the aim of all UK governments, not protecting the inefficient ones.

The best analysis on the FT’s ridiculous propaganda video was made by Barney Reynolds, Head of Financial Institutions, Shearman and Sterling,  whose contribution made more sense than anyone else:

‘Giving away sovereignty to reduce border frictions is an extraordinary notion. It is not an approach adopted by major countries in the world, let alone a G7 country, so why are we thinking in this extraordinary sort of craven way? I just think it represents a failure of analysis of the opportunities for the UK.’

Hear! Hear!

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About the author

Catherine McBride