Trade with the European Union is becoming increasingly difficult for businesses, as regulations on both sides of the Channel  continue to diverge.

A survey by the British Chambers of Commerce of 989 mainly SMEs found shortcomings in the Trade and Co-operation Agreement agreed on Christmas Eve in 2020.

It was designed to allow tariff-free trade with the EU once Brexit took effect.    

But services access has been limited by rules on business mobility and only 16% of exporters think the deal is helping them to grow sales in Europe, with 54% disagreeing.

Emerging issues like de minimis exemptions for low value parcels are also creating waves as the EU and UK work out their reactions to changes pushed by the US. 

The EU is now removing its exemption in 2026, but the UK will not follow suit until as late as 2029. This risks harming the competitiveness of British firms exporting to the EU alongside trade diversion from Chinese companies into the UK.     

The one bright spot is that awareness of upcoming changes in trade rules and regulations has improved significantly compared to last year. In 2024, more than three quarters of firms knew no details of much of the legislation. 

But as the onslaught of changes has caused firms increasing cost and bureaucracy, more have kept on top of new legislation. Only 11% did not know about planned changes on steel tariffs, while just a third (36%) were unaware of EU customs and VAT rule changes.   

The survey comes as it emerges Sir Keir Starmer will stick to his “red lines” of not rejoining a customs union with the EU, despite Health Secretary Wes Streeting suggesting doing so would boost growth.

Mr Streeting defied the prime minister and suggested Britain should have a “deeper trading relationship” with Europe as a means of boosting the UK economy.

However, Downing Street said the prime minister had been clear that while Britain was seeking a closer relationship with the EU, it did not include rejoining the customs union.

A customs union would mean the UK can access tariff-free trade with the bloc, while having to accept common standards for traded goods.

Sir Keir has warned that rejoining the customs union would undo trade deals Britain has struck with the US and India.

Meanwhile, the BCC has sent its EU reset report to Government. Its top five proposals for discussions in 2026 are:    

• Negotiate a deep SPS (animal and plant products) agreement to remove export health certificates 

• Finalise UK and EU Emissions Trading Scheme linkage to exempt goods from Carbon Border Adjustment Mechanisms 

• Establish a youth mobility scheme 

• Secure full UK participation in SAFE – the EU’s Defence Finance Initiative  

• Enhance VAT cooperation and customs simplification to reduce trade costs