Following the introduction of the UK Global Tariff Schedule (UKGT) on 1 January this year, Travers Smith LLP has analysed over 2,000 products where tariffs have been removed or reduced to explore which sectors benefit, what the wider impact will be and what more could be done.
The Travers Smith team looked in detail at sectors such as food & drink, manufacturing, chemicals & plastics, construction, clothing, fashion & cosmetics and retail.
Key conclusions from the firm's analysis are:
- There are meaningful savings to be made: Although the majority of the tariffs removed were already relatively low, over a third (i.e. more than 700 tariff lines) have benefitted from more substantial changes, involving the removal of tariffs in the 4-10% range (in some cases even higher).
- But they are unevenly spread and their wider impact may be limited: In broad terms, the product categories that benefit from the most significant savings are chemicals and plastics, textiles/apparel, certain food products, metals and horticulture. It follows that at least some businesses in those sectors can be expected to make meaningful savings, particularly where they purchase larger quantities – although we are concerned that a number of factors may limit the positive impact of the tariff changes.
- An attempt to promote more manufacturing/processing? A significant proportion of the removals/reductions (we estimate about 50%) apply to products which are likely to need further processing or be used as inputs for manufacture of other, final products; as such, the changes could be seen as an attempt to create a more favourable environment for manufacturing in the UK. But if that is the aim, further measures are likely to be needed to address other challenges facing the sector and the UK Government needs to "join the dots" between trade policy and its policies in other areas, notably regulatory reform.
- A reshaping of UK supply chains? As we explain in Section 2, some of these changes may be significant in reshaping UK supply chains and orienting them towards non-EU suppliers (even if they do not ultimately make anything cheaper).
The full findings from the analysis, as well as commentary on the sectors mentioned above can be found here.
Commercial, IP & Technology Partner, Ben Chivers commented: "UK purchasers of these products should check that they are getting the benefit of these savings on tariffs. For example, if you buy from a UK wholesaler or on terms which make your supplier responsible for paying tariffs, you may find that the savings we've identified are not being passed on. Many businesses are facing increased costs from both Brexit and COVID-19 – it is possible that wholesalers and suppliers may seek to take advantage of these savings to avoid having to raise prices on other products or services."