Where Insurance Will Fit into the Brave New World Post-Brexit
The securing of the first exports of UK beef to the USA in 20 years has been heralded as a “fantastic boost to the sector” by the Agriculture and Horticulture Development Board, whilst International Trade Secretary, Liz Truss, has talked of free trade deal negotiations creating “a host of export opportunities for British agriculture” (19). However, many food and drink businesses, along with other importers and exporters, will have concerns about what the post-Brexit world will bring, if 31 December arrives with no deal having been negotiated with the EU.
Currently, the UK is covered by EU-third-country trade agreements, despite having left the EU. As from 1 January, 2021, such trade agreements will no longer apply to the UK (20). Current Government efforts are being directed towards reproducing the effects of existing EU agreements for after 1 January, with the aim being to assist UK businesses and their trading arrangements by retaining as much continuity as possible.
New trade agreements are also being negotiated. When last updated, on 6 August, 2020, the Government website showed that 20 trade agreements had been signed (21), these being with countries including Chile, Central America, Iceland and Norway, South Korea, Tunisia and Switzerland.
Discussions are underway with 18 countries with which the UK currently trades through EU trade agreements, with this list including Canada, Singapore and Turkey. The site talks of a trade agreement with Japan having been signed on 11 September, 2020 and Mutual Recognition Agreements being in place with Australia, New Zealand and the USA.
Where Insurance Will Fit into the Brave New World Post-Brexit Government advice for food and drink businesses highlights the uncertainties with regard to goods declarations. It says importers and exporters should determine whether they wish to use an agent to handle this requirement. It talks of “new processes” that will apply to those exporting animals and animal products, as well as fish and fishery products.
The EU Plant Export Scheme is set to be subject to UK import controls and much of the labelling currently used by many products will need to change, with no references to the EU or use of EU logos allowed and a variety of other labelling requirements to which to adhere.
If importers and exporters are encouraged to find new markets or have no option but to seek out new buyers, there is at least a current safety net that can add to their confidence when arranging new sales with customers with whom they have no previous trading history. The UK Government’s bolstering of Trade Credit insurance, via its recently introduced Trade Credit reinsurance scheme, covers both domestic and overseas payments, meaning that exporters can back themselves with credit insurance, to be assured that their goods should be paid for.
The scheme is destined to support the 230,000 businesses at risk of not getting paid by international customers when exporting their goods and the UK Export Finance scheme, which provides the support, will cover UK exports to 180 countries (22).
Export Business Credit insurance can support global trade development and protect a business from various situations that could lead to non-payment, such as war and civil unrest, the actions of overseas governments, import and export restrictions and constraints caused by currency conversion and transfer difficulties.
Having such cover could be one less worry for British businesses reliant on overseas markets. However, past statements from Michel Barnier, the EU’s chief negotiator, which have related to there being a potential bloc ban on UK produce, will remain a concern, unless third-country style trade agreements can be put in place (23).
With the situation seemingly going down to the wire, British businesses will need to follow the advice that exists for now, hoping for a more promising outcome over the next few months and using insurance as a safety net, wherever possible.
Whilst Trade Credit insurance is one option, it may also pay to consider Product Recall insurance, particularly given the new labelling requirements. There are a host of other insurances, depending on the type of goods produced, the markets targeted, the modes of transport and distribution used and the business’s day-to-day operations.
Consultants and others offering advice will need to check their Professional Indemnity Insurance is up-to-scratch, whilst Business Travel insurance may also need to be more robust, according to where sales trips and client or buyer meetings are taking place. Life after Brexit really does seem to be shaping up to be a brave new world and a well-considered insurance protection net will have its part to play within it.