Back in 2000, Totnes was absorbed with the romantic phenomenon of a ‘world-beating’ local product: the catamaran Team Philips, the largest yacht ever built, designed to break the record time for sailing around the world. Like many Totnes families, we helped to sponsor it, and our names were among thousands painted on the hull.
As we stood with hundreds of people at Dartmouth Castle watching the catamaran sail off into open water, a lad in front of me said, “I reckon that the two hulls will each sail off in different directions.” In the context of Brexit, one might have responded with “That’s just ‘Project Fear’!”, but sadly the lad’s words were prophetic… as was ‘Project Fear’.
The fact is that, despite the romantic image of a prosperous post-Brexit Britain promoted by some to capture votes in the 2016 Referendum, many local small businesses are already being hit hard by the changes to the playing field on which they compete.
Much has already been written about the causes of their problems; the following case-studies simply can’t be dismissed as ‘teething problems’ which will disappear over time. In them, we hear from the creators of four businesses resulting, like Team Philips, from locally developed ideas and initiatives, each with its particular USP – unique selling point/proposition. Not only that, but these businesses provide an income for their creators and employees… which is now under threat… Let’s hear from them:
The Motorcycle Broker and Brexit
“I have been in the motorcycle industry, importing and exporting, for over thirty-five years. In the 1980s we were bringing Harleys in from the US, setting them up correctly and exporting them to Spain and other EU nations. It was impossible to get our annual turnover above £100,000.
Once we joined the single market in 1992, our turnover increased to £1.2m by 1994 and £7.5m by 1997. I was supplying 1.5 per cent of all new UK motorcycles, and many other dealers throughout the world, from my houseboat in London and a rented warehouse in Kent.
Today I run a classic motorcycle investment company based in Devon. There are particular models of bikes which make a good investment for our clients and we acquire about 8 per cent of those; we then add value to the machine by dealing with failing paintwork, going over old repair and restoration work, and setting the motorcycle up correctly. It’s a niche market and growing rapidly, with fewer and fewer people with the skills to deal with these old machines.
We buy in machines which have already had bodywork restorations carried out by the best in the world costing €60,000, but which won’t run without mechanical restoration; we have to do eight weeks’ work on them. We have our own mechanics, fabricators, and paintshop, and are working on opening our own chrome plate plant.
Nearly all of our motorcycles were sourced from mainland EU, because the machines in the UK are either not investment grade, or they’re already in very strong hands who have no wish to sell at any price. On the whole, we don’t import from outside of the EU as it costs a lot more to buy, source, and ship, the paperwork takes too much time, and the duty and VAT make it way too uncompetitive.
When we bought from the EU it was like buying in Manchester and selling in Devon. No duty, no VAT, transport costs between £200 and £500 per motorcycle. Today we have bought two motorcycles, one in the US and one in New Zealand. Transport comes to £2,300 per bike, paperwork and customs charges about £350 and 5 per cent VAT. If the bikes were a little newer, then the VAT and duty would come to 30 per cent.
Now there is no system to import the motorcycles from the EU, and HMRC say they don’t foresee a new operational system coming online until at least July 2021. We will have to pay VAT and duty, as the EU is a third country. To export to any of the 27 countries we will have to work according to each country’s own rules and rates, as every EU country makes its own rules. That means a lot of specific paperwork.
In addition, HMRC have told us that each motorcycle will require 19 pages of forms for every country the bike travels through. If the forms are not correct, then the vehicles will be sent back to where they came from.
The government’s own Department for International Trade have told me themselves that we do not have an FTA with the EU, we have a no deal. Consequently, I have had to raise prices by between 10 per cent and 35 per cent, depending on the age of the bike, and my customers are happy to pay the difference as we have such high standards and such a good reputation.
Our supply pool has been reduced by about 70 per cent, which will increase prices further. Once we have a way of trading once more with mainland EU we’ll pick up again, but with the VAT and duty, the 10-35 per cent increase in prices will apply. It’s good news for my investors who bought before 1 January of this year, as their machines have increased in value overnight, some quite considerably. This applies to antiques, cars, vinyl, wrist watches and to many other industries that have sprung up around the single market.”
Paul Jayson, The Motorcycle Broker
“Brexit and Covid-19 have both had an effect on our business and are interlinked. For Spokesman Wheels and the wider cycling industry, Covid-19 lockdowns created a huge demand for bikes, upgrades, spares and repairs. We have had a full order book for hand-built bicycle wheels since last April.
In the lead up to Brexit we had been trying to maintain high component stock levels. However, Covid-19 affected global transport massively, and lead times for delivery of components from anywhere in the world have lengthened. We hadn’t appreciated that when we ordered a crate of hubs from Taiwan, they were transported in the hold of a commercial passenger flight. When passenger flights stopped, so did the supply of air cargo.
We managed to get a large delivery of carbon fibre wheel rims into the UK at the end of October. As your readers will have heard, the customs process in the UK has become very lengthy and air cargo is affected as much as road cargo. Lines of lorries queuing at Dover make for better TV than an airport warehouse full of cardboard boxes! Our consignment of carbon rims was finally processed and delivered after a nine-week wait. Our customers were very understanding about the delay and only a few cancelled their orders.
Since 1 January, the repercussions of Brexit are becoming clearer. For some reason, the UK is treating trade with the EU differently from trade with the rest of the world.
Component suppliers in the EU are being asked to register for UK VAT, to collect payment from their UK customers in advance, and then send it to Customs and Excise in the UK. Not surprisingly, many have declined to do this, and are refusing to send goods to the UK because of the extra work for them.
By contrast, our goods from China and Taiwan arrive here tax-free and then UK Border Force agents calculate the VAT and import duty payable. We pay up and the goods are delivered to our site. A very quick process when it works!
We export to end-customers in Europe and the rest of the world. Since 1 January, we have been able to send goods VAT-free to all customers outside the UK. Customs declaration forms are needed. Different countries require slightly different information, but it is manageable. Our customers overseas will be required to pay their local VAT equivalent (and import duty if outside the EU) before the goods are delivered, but the total cost remains the same for them.
The number of customers for our wheels from the EU has remained about the same as previously. Journey times are a bit longer. The UK is losing out because 20 per cent of the cost of each item is now going to a foreign treasury rather than our own, which means less cash to spend on services in the UK.”
Mark Pollard, Spokesman Wheels
Look out for part 2 of this report – beeswax and bloomers.