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Retailers in a fix as the Brexit friction continues

Consumers face higher costs and reduced availability on the four-fifths of food imports that come from the Europe (EU), according to the British retail industry body as it renewed its call for Britain to strike a deal with the bloc which cuts red tape and border friction. Cabinet minister Michael Gove last month raised concerns among manufacturers and retailers, warning that a new EU trade relationship would involve increased costs and extra bureaucracy at borders. He admitted that a new “smart” border to cut trade friction would not be ready until 2025.

The British Retail Consortium (BRC) said that consumers will face higher costs and fewer goods without efforts to reduce the burden at borders. Almost 80 per cent of food that British retailers import comes from the EU, mostly through the ports of Dover and Folkestone, which handle almost 7,000 lorries every day. The warning from the BRC comes as new data shows that manufacturers saw a slump in export orders for the second consecutive quarter at the end of last year. The British Chambers of Commerce and DHL Express, said that the government must prioritize winning ease of access to key markets for exporters in trade deals.

The BCC’s report on the health of UK exports shows that border difficulties would disrupt thousands of businesses whose order books are already weakened by Brexit uncertainty. The balance of manufacturers reporting increased export orders fell to -2 per cent. The balance for service sector exports remained flat, but at historic lows after declining sharply through last year.

The BRC has also accepted that so-called “frictionless trade” is not possible given the British government’s aim of diverging from EU rules and regulations, but said that the impact would be mitigated by efforts to reduce paperwork around value added tax, export health certificates and other customs and excise procedures. It is also calling for a zero tariff trade deal. The survey of more than 3,300 businesses also showed a drop in investment in plants and machinery. Domestic orders rose by 3 points to -1, but still sit significantly lower than the first quarter of 2019 when the figure was at 16. Businesses’ cash flow improved to +2 from a low of -9 in the third quarter, but was still weak compared to the fourth quarter of 2018 at +9.