Published on January 25, 2021 by Holly Porter

What’s been happening in the commercial world over the last two weeks? Read on to find out!

UK-EU Trading Problems

This week, UK-EU trading problems became more evident. Although the Department for International Trade has disassociated itself from any official government policy, some UK firms have reported that they were encouraged to set up subsidiaries in the bloc. Critical problems under the new trade rules include extra charges, taxes and paperwork for firms exporting to the EU.

One complication concerns the new necessity for an approved health certificate for every consignment of fresh food. For example, the Cheshire Cheese Company, which retails its gift boxes at £25-£30, claims the company now has to obtain an extra £180 certificate for each box. In response, the company is considering setting up a hub in France. The fresh meat and fish industries are struggling particularly with exports, which has prompted the government to establish a £23m support fund for fishing companies. London-based DH Foods is experiencing significant delays, which has caused a loss of customers and 30 tonnes of pork, costing the business tens of thousands of pounds. The length and complexity of post-Brexit paperwork is particularly challenging for the fresh meat industry given the perishable nature of the goods: a time limit of five days to arrive at the destination. The British Meat Processors Association (BMPA) has warned that European countries may seek meat elsewhere if the situation continues.

Another problem is returning online goods. UK retailers believe it may be cheaper to burn returned goods sold to EU citizens instead of shipping them back to the UK. One brand alone has incurred charges of £20,000 to get their returns back to the UK. Under the new trading rules, European customers have received an unexpected customs invoice when ordering UK goods. Charges include export clearance charge, import charge arrival, import VAT charge as well as the provision of rules of origin paperwork. For UK firms, which are already struggling from flagging sales throughout the pandemic, a mounting volume of goods stuck with courier services on the continent is a worrying cost.

Talking point: What other problems have there been? 

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Nissan Commits to Sunderland

This week, Japanese car manufacturer Nissan began its first post-Brexit move by committing to its Sunderland plant. The news comes after Nissan expressed doubts about the plant’s sustainability should Britain leave the European Union without a deal.

Now, Nissan has invested in additional battery production in Sunderland. This means fewer batteries will be imported from Japan and more generated domestically, meeting the new trade rules needed in order to qualify for zero tariffs when exported to the EU. Given 70% of the cars made in Sunderland are exported, and the majority of these are sent to the EU, this is great news.

It remains unclear whether there will be an expansion to the 6,000 direct employees at the plant. However, the news has been welcomed favourably by the 70,000 in the wider supply chain who had been concerned over job security in the event of a no deal.

However, some experts, including former boss of Aston Martin Andy Palmer, believe the UK still has work to do in the car-manufacturing industry.  The UK government needs to invest and foster battery investment so as to keep up with China, Japan, America and the rest of Europe. A worrying statistic has seen the UK car investment level plummet from an average of £3.5bn in the 5 years leading up to the Brexit referendum to £1bn in the 4 years since. As more companies commit to a future in EV, the UK needs to be able to keep up and maintain a good global market share.

Talking point: How does the UK currently compare with other countries in the electric vehicle market? 

Race to buy Topshop

After the Arcadia Group went into administration at the end of last year, auditor Deloitte has been searching for a buyer for the 440 stores and 13,000-strong workforce. This week, a major contender Next pulled out of the race.

Who is still in contention? Two groups have reportedly submitted an offer.

(1) Mike Ashley’s Frasers Group, who had already offered a £50m emergency loan to Arcadia CEO Sir Philip Green back in November. The group was also pursuing a deal for British department store Debenhams. However, it lost out on Monday to online fashion retailer Boohoo, who bought Debenhams for £55m.

(2) Authentic Brand, the US owner of Barneys, has tabled a joint offer with JD Sports. This move would allow the American company to establish a foothold in the UK.

There are three other major interested parties:

(1) Chinese fast fashion retailer Shein – reportedly offered £300m.

(2) The Issa brothers – there are rumours the new owners of Asda have also bid.

(3) Online fashion retailer Asos – reportedly offered £250m. Asos is arguably the most interesting bidder given it is already one of the biggest wholesalers for Topshop, Topman, Burton and Miss Selfridge. However, as Asos operates purely digitally, a sale here would still cost a substantial proportion of Arcadia’s 13,000 jobs.

Initially, analysts were convinced the Arcadia Group would be broken up. This is yet to be seen, but a decision is expected by the end of January.

German Manufacturers Challenge Tesla Sales

Although Tesla is a dominant force in the EV world, German car manufacturers BMW, Daimler and Volkswagen collectively outpaced the American company for sales. In 2020:

  • Tesla sold 499,550 cars (all electric vehicles)
  • The Volkswagen Group sold 5.3m, of which 212,000 were battery-powered or hybrids. Of the 12 constituent brands, German manufacturer Audi was a key contributor. Interestingly, the continent saw 117,000 EV sales; in the same area, Tesla sold only 96,000
  • BMW Group sold 2.3m, of which 193,000 are electric vehicles
  • Daimler sold 2.2m, of which 160,000 were electric and hybrid cars.

There is an added incentive for consumers to purchase EV cars in Germany. Last year, Berlin decided to double the subsidies for those who purchase emission-free vehicles. This had led Germany to be the greatest market for EV cars in Europe, having a purchase number twice as large as the next most popular market France.

Europe-wide, the EU has introduced ambitious CO2 reduction and environmental targets to hit. Therefore, it is likely EV’s popularity will continue to rise.

Talking point: Do you think German car manufacturers can compete with Tesla? Do you think Chinese electric vehicle companies will come out on top? 


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