Britons Finally Taste Full Brexit as Costly Border Checks Begin

(Bloomberg) -- Just down the corridor from where Danish Crown’s pigs are slaughtered, boned and prepared for export as bacon, six staff have a new task: filling in customs and health certificates made necessary by the UK’s split from its largest trading partner.

Most Read from Bloomberg

The scene at the abattoir in Blans, Denmark, lays bare the change created by Brexit: More time than ever spent on untangling red tape for shipments to Britain. From April 30, the UK will impose checks on fresh food imports — a stark reversal from the era of frictionless trade when the country was part of the European Union.

Ministers have delayed the change multiple times, wary of stoking inflation in a cost-of-living crisis and knowing that any repeat of empty supermarket shelves — caused in recent times by everything from climate change to a shortage of truck drivers — would be politically toxic.

But almost eight years after the 2016 Brexit referendum, companies and consumers are about to experience close to the end result.

Danish Crown, which exports 1,000 tons of bacon a week to the UK, said it has been preparing for the checks for a long time. With no prospect of walking away from its most important bacon market, the company is confident of making it work, Lars Albertsen, the company’s UK managing director, told Bloomberg. “We’ve exported bacon to the UK for 130 years, it’s part of our DNA,” he said.

Yet Albertsen also predicted smaller exporters may “shy away” as Britain becomes more costly and bureaucratic to trade with, leaving consumers facing more expensive produce. “It’s a disaster for the UK,” he said.

Virtually all pork imported by the UK comes from the EU, much of it from Denmark and farms like Allan Gammelgaard’s. On his 1,730 acres (700 hectares) in Odder, about two hours’ drive north of the abattoir in Blans, the 43-year-old rears about 43,000 pigs a year for Danish Crown.

When Brexit happened, Gammelgaard worried about the implications for a key market for his pigs. “As farmers we couldn’t do anything, it’s the company who had to solve that — and they did,” he said.

In fact, the time the pigs spend on Gammelgaard’s farm are the only part of the trade untouched by Brexit. The changes and added costs start when the pigs, by now weighing about 110 kilograms (243 pounds), are moved by truck to the abattoir. That’s because Britain requires certain food products from EU nations to arrive with health certificates signed by a vet in their country of origin.

@EllenAMilligan explains why

— Bloomberg (@business) April 26, 2024

For every consignment of bacon or other pork cuttings to England, Dorte Braendekilde, who works in Danish Crown’s shipping team, plugs details like the weight, departure date and destination into an EU database. It takes about ten minutes, before it goes to an onsite vet in Blans for certification as free from disease. It’s then re-uploaded, and stamped as “valid.”

The result is a five-page digital document UK authorities see when shipments arrive, each costing 120 kroner ($17). Companies need a certificate for each product type, so for Danish Crown that usually means one per truck. Any split shipments, though, would need more.

On top of the certification costs, EU exporters from next week will have to pay fees of up to £145 ($182) for goods like sausages, milk and fish to pass through British ports, including Dover and the Eurotunnel at Folkestone — in effect to subsidize the cost of the UK’s new health checks.

The British government expects the fees to raise food prices by 0.2% over three years. Some economists paint a bleaker picture, with restaurants, delicatessens and wholesalers facing a hit. Allianz Trade predicts a 0.4% loss of consumer spending. “These costs will all inevitably have to be passed on to consumers,” said Katie Doherty, head of The International Meat Trade Association.

Still, there’s little sign of Danish firms pulling out, according to Line Garboel, deputy head of international trade at the Danish Veterinary and Food Administration, which set up a taskforce and hired nine people to prepare exporters for Brexit. For now, Garboel said she’s more concerned about what happens if the UK gets behind on spot checks, delaying delivery of perishable products.

“Right from the start, we took Brexit very seriously because we knew that it was an important market for our businesses to continue operating in,” she said.

Visiting every stage of the journey from Danish farm to UK market, a picture emerges of the reality of Britain’s decision to leave the EU – it’s not that trade stops, it’s just harder and that bit more expensive.

The 19-hour route from Esbjerg to Immingham, northern England used by Danish Crown had operated customs-free within the EU for decades. “Now we’re back to the mid-70s,” said Christian Pedersen, head of operations for the route at Danish shipping firm DFDS, referring to the new Brexit checks.

DFDS hired five employees at Esbjerg to deal with border compliance. Mornings are spent on customs work for cargo arriving from the UK, from seafood and dairy products to textiles and waste used for energy. Spot checks by customs officials can include the use of dogs and X-ray scanners.

The work is reminder that Brexit has upended trade for imports to the EU, too. “Brexit has given us the sense that we’re now dealing with a third country,” Pedersen said. “Everybody is saying that we should compare the UK with China in terms of customs formalities.”

By afternoon, attention shifts to the dozens of lorries rolling on and off a DFDS vessel, loading about 180 trailers of goods the UK relies on Denmark for. Pork, furniture and crisps feature heavily. Pedersen’s team checks the units for the correct customs paperwork. Danish Crown bacon is loaded into temperature-controlled trailers, where it continues to cure as it travels across the North Sea.

Like Garboel, Pedersen worries about the knock-on effect in Esbjerg if British officials get behind on the Brexit checks, triggering a backlog.

Some companies have already warned they’ll seek other routes or stop trading with the UK altogether if port charges make the Esbjerg-Immingham route too expensive. “That’s of course a major concern,” Pedersen said.

In the UK, most ports are privately owned and set their own fees for checks, using the £145 set by the government for Dover as a guide. This allows them to recoup what they’ve spent to set up and staff the border checks facilities, but it also allows each port to compete on price to attract trade.

What that means, in effect, is that if Immingham raises charges too much, Esbjerg would also suffer if shippers stay away — and vice versa.

Though less well known than Dover, which features in any warning about post-Brexit trade friction, Immingham is the UK’s largest port by tonnage. It’s a key part of the wider Humber port complex, which includes Grimsby, Hull and Goole, handling £75 billion worth of trade a year.

The region also voted overwhelmingly for Brexit. Then Prime Minister David Cameron was heckled when he visited the nearby town of Cleethorpes in June 2016, days after losing the referendum and announcing his resignation.

Yet eight years on, a cost of Brexit that Cameron warned about — the end of seamless EU trade — is about to properly hit home. Associated British Ports has had to build two border control posts at Immingham and Hull, with only two-thirds of the £34 million cost covered by the government. Though the UK is due to implement a set of safety checks at the end of October — at which point the terms of Brexit will be fully in place — it’s the health checks on food that are expected to have the biggest impact on trade.

ABP has the option to recoup the remainder through setting the levies for agrifood imports. But it’s not that simple, according to Simon Bird, the company’s director for the Humber region.

“I’m very mindful that we need to remain competitive with other ports, and equally with our customers,” he said.

When a DFDS vessel carrying Danish Crown meat and other products arrives at Immingham, UK government agencies will have told the shipping firm which units it wants to inspect under the new rules well before the ship arrives.

The border control post is divided into three sections — for health staff checking lower-risk products, for border force responsible for tackling smuggling, and the most high-tech section for vets to inspect higher-risk agrifood produce. A sampling section contains fridges and a sterilized knife cabinet. Lorries reverse into one of 17 bays at the facility, which is about a mile away from the port.

That’s far from typical. At Dover, which handles a third of the UK’s trade with the EU, the new facility is more than 20 miles from the port.

The Dover Port Health Authority warned that it won’t be able to cope. Moving the checks inland “will undermine our entire GB border and biosecurity system, creating an open door for disease and food fraud,” Lucy Manzano, the authority’s head, said in a letter to members of Parliament last month. She said the government has designed a system to release goods without checks if the facility is unable to cope — a contingency plan she described as alarming.

The government’s approach will be “light-touch” to avoid disruption, exports minister Malcolm Offord told Bloomberg’s UK politics podcast.

One of Danish Crown’s UK customers is Robert Todd, whose father started in the industry in the 1950s cutting pigs in what is now London’s Smithfields market. Nowadays Todd Meats turns over £22 million a year, he said, selling pork, chicken, lamb and more to wholesalers and catering butchers.

“I wasn’t in favor of Brexit, I’m still not in favor of Brexit,” he said, recalling how the referendum result kept him awake at night. He took classes and attended conferences to learn what would change and how to adapt.

He now mostly buys produce from EU exporters who also have distribution companies in the UK, and has largely shifted to a system where the the seller is responsible for any import duties and clearances rather than the buyer. If the new checks impact the supply chain, he’s prepared to hold more stock in a temperature-controlled facility in Kent.

The price he pays for Danish Crown pork changes each time they negotiate a new contract, subject to market conditions, shifts in supply and demand and currency fluctuations. That will make it difficult to see the specific Brexit impact on price — though Todd is in no doubt there will be one.

“Companies aren’t just going to absorb that cost and just go ‘don’t worry about it,’” he said. “You just won’t be able to find it.”

The checks are already shifting how the trade works, because of the way import and certification costs are applied to product category rather than weight. It makes more sense to buy 20 tons, for example, rather than one. But he said many companies, particularly Spanish pork exporters, are already choosing not to sell to the UK, finding it easier to send products to Germany.

After the 2016 referendum, it took the UK and EU four and a half more years to figure out how they would keep trading. Yet it’s only now that companies like Danish Crown and Todd Meats are finally dealing with what was decided.

“We’re now doing Brexit and we’ll get to see how it works out,” Todd said.

--With assistance from Celia Bergin and Alex Morales.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.