Business

Flanders looks beyond Brexit Britain for business opportunities

One of the EU regions most economically intertwined with Britain is urging its companies to look beyond the UK for opportunities as it anticipates the full impact of post-Brexit trading conditions.

Jan Jambon, minister-president of Flanders, told the Financial Times his administration was encouraging businesses to think ambitiously about new markets — harnessing the region’s strengths in cutting-edge sectors such as chemicals and machinery.

The strategy mirrors one advocated by UK prime minister Boris Johnson. Mr Johnson believes once British companies get to grips with the form-filling and other new requirements for doing business with the EU, they will have the administrative knowhow to trade elsewhere with ease. 

Mr Jambon said his government’s programme — known as “Go Beyond Brexit” — was driven by similar logic, noting the UK’s departure meant Flemish businesses would need to navigate customs procedures that did not exist within the EU and that they should exploit this knowledge.

“Companies will be supported [by the government] in diversifying their export markets and transforming their business operations,” Mr Jambon said.

Jan Jambon says the moment of truth is still to come as UK customers of Flemish companies stockpiled inventory in the final months of 2020, temporarily reducing demand © Dirk Waem/Belga Mag/AFP via Getty Images

The region’s plans include support with customs paperwork and other administrative hurdles and help from a government agency in defining export strategies.

The move is a sign of how the EU is grappling with the realities of what Brexit means for trade, as companies, especially small and medium-sized businesses, contend with the addition of obstacles to established relationships. The message from Flanders is that it is not just the UK that needs to move on.

Mr Jambon acknowledged that Flanders also needed to brace for the possibility that trade with Britain — its fourth-largest export market — may simply not be as lucrative as in the past.

Studies cited by Flemish authorities suggest that even if Britain had opted for a softer Brexit, staying inside a customs union with the EU, Flanders would have lost 0.6 per cent of gross domestic product and 6,500 jobs.

“It’s difficult to say already what will be the effect of Brexit on the competitive position of our companies on the UK market,” Mr Jambon said. “If it changes and our competitive position will be worse than it was . . . then, OK, the diversification of markets also helps companies.”

Flanders, which encompasses the northern part of Belgium, has been heavily interlinked with the British economy for hundreds of years. Its ports of Zeebrugge and Antwerp are vital conduits not only for Belgium but for the wider EU in its trade with the UK. Flanders’ annual exports to the UK are worth about €26bn, with cars and chemicals among the biggest sources of bilateral trade.

Flanders’ export dependence on the UK, share of country’s goods exports going to the UK, 2019 (%)

Belgium has not been hit by the disruption that snarled trade on the British side of the border, with no large-scale backlog at the ports.

But Mr Jambon said the moment of truth was still to come — noting that UK customers of Flemish companies had stockpiled inventory in the final months of 2020, temporarily reducing demand. That, coupled with typically light trading around the start of year, meant that the full reality of the new arrangements would only start to be felt around the end of January or early February, he said. “This will be the real stress test.” 

Government authorities expect food, textiles, cars and chemicals to be among the most affected sectors, in line with academic studies.

Tine Vandervelden, international business manager at the Federation of the Belgian Food Industry, said the sector was braced for more problems to come to light in the coming weeks.

An immediate concern has been the UK’s new limitations as a distribution hub, as some companies are hit by tariffs when they re-export products from Ireland after importing them into Britain. 

“There has been virtually no time to adapt to this situation,” Ms Vandervelden said. One proposal was to ship directly from Belgium to Ireland, cutting out the UK, but this would entail significant logistical difficulties.

Further complications will follow as the UK implements the full range of border checks in the coming months, after introducing a light-touch regime at the start of the year. It is the “calm before the storm”, Ms Vandervelden said. 

Luc Vanoirbeek, the secretary-general of the Association of Belgian Horticultural Auctions, said the effect of Brexit on Belgium’s fresh produce sector had been masked in some senses because of the quieter winter season for exports of fruit and vegetables. 

“Once the season really gets started, every delay is a delay too many,” he said, referencing the need for rapid deliveries of perishable products such as strawberries and lettuce. 

Mr Jambon said contingency plans were in place to try to minimise border disruption at the ports: dedicated parking zones have been established to deal with customs formalities and drivers are also equipped with an app showing when they can proceed from parking lanes into the port terminals.

One indication of potential difficulties was the hundreds of questions the region’s authorities have received via their Brexit help desk and in webinars organised since the trade deal was struck. 

A webinar, organised specifically on the so-called “rules of origin” that goods must meet to be traded tariff-free, filled up with participants so quickly that another had to be organised for the following week. 

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