Rathfinny Wine Estate

A No Deal Brexit

We have avoided getting involved in the whole Brexit debate as we have various opinions here at Rathfinny, probably echoing the rest of the country, and lately, it’s become quite a polarising issue. Group polarisation, discussed by Daniel Finkelstein in The Times last week, has taken over with each side holding more and more extreme views. However, we run a new and expanding English wine business and, as we move ever closer to the 29th March, I thought that I should share the concerns we have of exiting the EU without a deal. But, before you all start shouting at your screen, let me say that I’m not trying to make a political statement, what I’m trying to explain with this blog are the very real, practical issues that we may face in a no-deal scenario.

Importing issues – It is clear to the majority of observers that ‘no deal’ will inevitably lead to longer waiting times at ports in France and England. We have done as much contingency planning as we can, such as pre-ordering all the bottles, corks, cages and as much capital equipment as we can, that we will need for the next year (which hasn’t helped with our cash flow), but we need seven new fermentation and blending tanks, to manage last year’s record harvest and for our anticipated harvest in 2019. We can’t get them here until May, and we need them before bottling in June. Any delay would be very damaging for our business, plus they will currently arrive tariff and VAT free. If we leave the EU without a deal then what will the tax situation be and will we get them here before June? Now you could say that this is just a short-term inconvenience, however, it’s not clear what will happen in the medium term. We’re still a fledgling industry, so we don’t have the infrastructure established to provide for the wine industry, so we rely on our European partners to provide much of our equipment. For example, we have to import all our bottles from the continent, no bottle manufacturer in the UK can make sparkling wine bottles, and most of our plant and machinery comes from Europe. One thing is certain, it will surely involve a lot more paperwork without a deal.

Exporting headaches – When we export our wines, they are typically shipped to Europe first and coalesced (joined together with other goods), into larger shipments heading to the same place. They are then put into containers that are exported via Rotterdam, Antwerp or Hamburg. Many containers are shipped from UK ports such as Southampton but they are unlikely to hold wine, as we rarely ship a whole container load at a time. If we leave without a deal that coalescence will be very tricky: Our wines, unless they are kept in a bonded warehouse, may attract duty when shipped into the EU, and may attract a different rate of duty to the wine it is being shipped with.

Bear in mind that Rotterdam is by far the largest port in the EU, dealing with over 460 million tonnes of cargo every year and some 10-12% of that comes to and from the UK. If you want to understand more about the issues facing Rotterdam, please read the following article.

Software issues – We also have the added complication that the Customs Handling Import and Export Freight (CHIEF) software, which currently records all imports and exports, is being upgraded to the Customs Declaration System (CDS). Our understanding is that the CHIEF system is not able to cope with the increased trade and apparently constantly fails. The new CDS software was only rolled out in January of this year (2019) and it is hoped will be ready by March. Ask yourself, when has the government ever introduced software that works and is delivered on time? Hopefully, it will, but it’s already six years late in delivery and the UK needs that system to cope with the estimated six-fold increase in trade from March 2019 in a ‘no-deal’ scenario.

These are just some of the issues that may affect us, a small but growing business in Sussex, that currently provides employment for over thirty people and seasonal employment for a further one hundred and fifty. Now imagine what a larger integrated manufacturer is facing in a no-deal scenario.

I’m not saying that Brexit is a good or bad idea. The referendum held in 2016 showed that a majority wanted to leave the EU, so the government is trying to carry out the wishes of the majority in that referendum. However, what I’m trying to express is the uncertainty that this debate is having for business in the UK and elsewhere. I’m trying to explain the real practical implications that a ‘no-deal’ Brexit might have on a small business like ours.

Ultimately, after forty years of membership of the European Community (EU), we are now so interwoven that we need to agree a Free Trade Agreement with the EU, which will hopefully allow frictionless trade with Europe and the rest of the world. That is in all of our interests. What is not in the UK’s or the EU’s interest is to leave without a deal. #NoToNoDeal

SHARE Mark's ARTICLE

COMMENT ON Mark'S ARTICLE

  • Some may say a very first world problem, but 30 directly employed, and lots of others upstream and downstream. Other businesses will be even more impacted affecting many jobs and peoples lives. Airbus! If we are going to leave, we need that deal, no deal is utter madness. #NoToNoDeal

  • Interesting article Mark.
    The failure of govt to maximise its position provided by the 2016 result is nothing short of an epic dereliction of its responsibilities to negotiate the best deal for the UK for March 2019. The 2016 result provided a simple statement of intent: that on March 29th 2019 we would be leaving the UK without a deal and on WTO rules – that in essence was what we voted for. That therefore was the platform for negotiating a better deal with the EU. Instead we managed to tie ourselves up in knots, forced an unnecessary GE that further weakened the PM and led to further convoluted and poor concessions, presided over by a institutionally remain majority House of Commons. The only clear majority that there seems to be in that house!
    The Commons defeat the other week could have reset the negotiations on that original result and lead to the only correct negotiation pathway…. but it didn’t, further reinforcing my point. Despairingly.
    It feels to me we could get to a No Deal scenario on 29th March – as we are fundamentally and constitutionally hanmstrung – by default. I suspect at that time there will be a hastily cobbled together agreement by the EU27 (panic stations because they can’t afford us to exit with a no deal any less than we can) and the UK to extend the current arrangements without extending Article 50. Extending article 50 has the potential to precipitate a constitutional and democratic crisis almost without precedent for the govt. So at that point a deal will be negotiated that probably looks like the one we ought to have had had we done a proper job of negotiating in the first place!
    “What about the Backstop!?” People will no doubt be screaming at their screens – in my view and this has become increasingly apparent in recent weeks – it was always a politically constructed red herring.
    If it all does pan out roughly as above you read it here first!

    • Barry, I suspect you might be correct. However, that doesn’t help a small business like ours that is trying to carry on with its production and export its product around the world. Sitting in Westminister the real world can all seem very distant, but the real world is just down the world is having to deal with all the uncertainty.

  • Very true Mark. It has been the uncertainty that has been the most damaging aspect of what I describe above. The job of DIT et al has been at best “half arsed” simply because the mandate to do their job properly has been muddied by a total lack of clarity or clear direction in the, and I use the term advisedly “negotiations”. Consequently businesses have struggled within a landscape where there is no clear information of what will/should happen next.

  • Very interesting. No axe to grind apart from reality biting makes this a more powerful piece than almost anything else I’ve read. Thanks

  • Mark, I may be seeing Hi in person in a couple of weeks, am booked on a wine tour while staying in Wingrove.

    I sympathise with your very clear and obvious challenges in dealing with this problem. I also concur with Barry that the basic challenge here is that having invited the people to vote and agreed to enact the decision, you have a very remain focussed parliament who after an initial period of inertia, seem in large part to have set out on a path to outright block any real Brexit, egged on by much of the media, incluing people like Finkelstein. An ill thought and fought election hasn’t helped. The main problem there was Labour dissembling about their position by notionally being a party that backed Brexit only to become the dog in the manger. And of course our negotiators have not actually negotiated, they have acquiesced, mainly because it seems pretty much all the civil service are strongly pro remain and their hearts are not in it.

    All this leads inevitably to the mess we now face. Granted we have got used to the benefits of a customs union with the EU but it is worth reminding ourselves that precious little global trade happens within a customs union and the rest of the world seems to manage it OK. In fact I think we mistakenly imagine the EU is some kind of perfect model with few disadvantanges. Yet it has been copied nowhere else in the world. In fact, now that Mercosur has all but folded and the GCC has internecine wars, there isn’t even a single functioning customs union anywhere in the world. There’s things like NAFTA and ASEAN but they are not remotely customs unions and we could and should have had our version of that with the EU by now, if the politicans had a will to so do.

    And that is why so many of us voted leave. In the end, even a customs union requires you to give up a lot of domestic political control and sovereignty. Nature of the beast. If you start from the other direction, thinking about entering one, that is a very unappealing notion especially when you know you can manage just fine without being in one. Otherwise, why would Canada not be pushing for a full customs union with the US, by far its largest customer, and even offering to adopt the US dollar? Why would Oz and NZ not do likewise? Why have the other customs unions that have been tried, failed? Why if it is seemingly so impossible for us to leave the EU without massive damage, did politicans involved in all the treaties that led us to this point, never raise this rather significant issue with the electorate when that point of no return was reached. Come to think of it, why did the people who negotated the GFA not give any thought to what might happen if we left the EU? Because of gross incompetence? Because they had already decided we would never be allowed and should never be allowed to leave the EU?

    Not much help for you in your present predicament of course. If it’s any comfort, my own view, even as a leaver, is that our politicans and civil servants will retain their comfortable pre retirement sinecures in Brussels and we will be back to as we were eventually- but how much will we have lost by so doing? If we do end up doing that, I just hope we do it properly and join the euro etc….

Write a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.