UK firms told to set up in EU to avoid trade disruption

UK firms that export to the EU say they are being encouraged by the government to set up subsidiaries in the bloc to avoid disruption under new trade rules.

Firms have been hit by extra charges, taxes and paperwork, leading some to stop exporting to the EU altogether.

But several say they have been told that setting up hubs in Europe would minimise the disruption, even if it means moving investment out of the UK.

The Department for International Trade said it was "not government policy".

"The Cabinet Office have issued clear guidance, available at www.gov.uk/transition, and we encourage all businesses to follow that guidance."

The Cheshire Cheese Company said it had been advised by an official to set up in the EU after it was forced to stop its exports to the bloc due to trade rules that came in on 1 January.

Only solution

The firm, which sold £180,000 of cheese to the EU last year, found that every £25-30 gift box of cheese it sends to consumers on the Continent now needs a veterinary-approved health certificate costing £180.

UK retailers who export to the EU have also complained about being hit with unsustainable costs when customers in the bloc return goods bought online. This is due to new customs clearance charges incurred by shipping firms.

Some retailers have even warned they could burn clothes stuck at borders as it is cheaper than bringing them home.

As early as last October, trade consultants Blick Rothenberg warned that thousands of UK businesses might need to set up an EU presence in order to keep exporting to European markets.

However, experts say EU firms exporting to the UK - which currently enjoy a grace period over the imposition of some rules - will soon face the same issues.

Indeed, some EU exporters have already stopped deliveries to the UK because of new VAT related charges.