Research and analysis

Executive Summary: Understanding EU-only trade by businesses above and below the VAT threshold 2019

Published 15 July 2025

This report was commissioned under the Conservative administration (2010 to 2024), and conducted in 2019.

HM Revenue and Customs (HMRC) Research Report 821

1. Introduction

HM Revenue and Customs (HMRC) commissioned IFF Research to undertake research to understand more about the trading behaviour of businesses whose international goods trade is conducted exclusively with European Union (EU) member states and explore what the impact of EU Exit will be on this trade.

This report summarises key findings from 2 strands of research:

• a quantitative telephone survey conducted with 847 businesses who trade goods with the EU only (730 were Value-Added Tax (VAT) registered and 117 were not registered for VAT)

• a qualitative ‘follow-up’ phase consisting of 40 in-depth interviews with businesses who trade goods with the EU only where 36 were VAT registered and 4 were not registered for VAT (these interviews were either conducted face-to-face or by telephone)

Fieldwork took place in the summer of 2019 when the United Kingdom (UK) was due to leave the EU on or before 31 October 2019, although the terms of the exit had not yet been agreed at this stage. As these results are from 2019, they reflect the policy context of that time rather than any changes that may have happened since.

1.1 Note on the VAT unregistered findings

The exact population of VAT unregistered EU-only traders is unknown. For this reason, the 117 VAT unregistered EU-only traders who took part in this research were sourced using unrepresentative methods and their responses are not weighted back to the wider population. Caution should be applied to the VAT unregistered findings, since they may be biased towards representing the experience of more engaged VAT unregistered EU-only traders.

2. Overview of EU-only trade of goods

Close to two thirds of businesses (62% of VAT registered and 65% of VAT unregistered businesses ^{[footnote 1]} agreed that EU trade was essential to their business. In the qualitative interviews, businesses regarded EU trade as an essential part of their business model if they felt they had no alternative way of operating without it.

The most common reason VAT registered businesses gave for choosing to import goods from the EU was due to the goods being unavailable in the UK (74%). Quality (39%) and value for money (35%) were the next most frequently cited reasons. VAT unregistered businesses who imported goods were most likely to be motivated by quality (70%) and value for money (53%). The most common reason for exporting goods to the EU was to gain access to a larger market (56% VAT registered, 81% VAT unregistered).

The majority of VAT registered (75% of importers, 81% of exporters) businesses conducted their EU trade at a frequency of once a month or less. This frequency was predominately decided by the sales pattern of the business and customer demand. Amongst VAT unregistered businesses, around half (51%) imported more than once a month and two-thirds (66%) exported more than once a month. The frequency of trade amongst both VAT registered and unregistered businesses tended to be quite reactive according to variations in customer need.

The monetary value of EU trade had remained consistent for VAT registered businesses over the past 12 months (at the time of interview): 61% reported it had stayed the same, while it had increased for 20% and decreased for 18%. VAT registered businesses with turnovers above £1 million were significantly more likely to have seen an increase in the value of their trade than those with lower turnovers. Almost half (45%) of VAT unregistered businesses reported that the value of their trade had increased in the last 12 months. In the qualitative interviews, businesses reported that the value of their trade was mainly influenced by customer demand, although some had increased importing as a stockpiling exercise in preparation for EU Exit.

A quarter (25%) of VAT registered businesses and two-thirds (62%) of VAT unregistered businesses reported that they use intermediaries when trading with the EU, most commonly road hauliers (74% of VAT registered, 86% of VAT unregistered) and freight forwarders (58% of VAT registered, 74% of VAT unregistered). Intermediaries were most commonly used for convenience (83% of VAT registered, 71% of VAT unregistered) and for their knowledge of customs procedures (70% of VAT registered, 64% of VAT unregistered).

3. Preparations made for EU Exit before 29 March 2019

Only 3 in 10 (32%) VAT registered businesses had made plans or preparations to continue their EU trade ahead of 29 March 2019, when the UK had originally been due to leave the EU. A significantly higher proportion of large businesses had done so (62% of businesses with 50 to 249 employees compared to 28% of businesses with 1 to 9 employees and 26% of sole traders). The most common actions taken to prepare were to apply for an EORI number (64%) and research key customs processes, systems and regulations (49%).

Half (51%) of VAT unregistered businesses had made plans or preparations at this time. The most common actions taken to prepare amongst VAT unregistered business were to take on new customers (63%), adjust prices (50%) and apply to use CTC (50%).

Awaiting more certainty was a key factor behind not making plans or preparations: 6 in 10 (62%) VAT registered businesses and half (48%) of VAT unregistered businesses, who had not made preparations, reported this was the case. In the qualitative interviews, businesses who had not made preparations felt there was no additional support or guidance HMRC or the government could have provided at the time.

4. Expectations after EU Exit

In the qualitative interviews, it was common for businesses to feel unable to identify any potential opportunities of EU Exit for their business. Amongst those that could envision opportunities, the most commonly identified opportunity was the potential for increased sales within the UK. The potential to expand trade outside of the EU (RoW) was frequently not seen as an option: businesses were concerned about the quality of imported goods, and prohibitively higher costs. Almost all businesses identified potential challenges of EU Exit to their businesses, most commonly the potential impact of tariffs negatively impacting sales. Potential delays to the movement of goods, and increased administrative burden were also key concerns.

The majority of businesses that used intermediaries at the time of interview reported they would continue using them after EU Exit (87% of VAT registered, 73% of VAT unregistered), although half (48%) of VAT registered businesses that used intermediaries were unaware whether their intermediary offered the services to handle customs requirements for post-EU exit EU trade. Sixteen percent (16%) of VAT registered businesses that did not use intermediaries reported they would start using them after EU Exit. In the qualitative interviews, the most common reason given for starting to use intermediaries was to gain support with new customs requirements.

The customs facilitations that VAT registered businesses were most frequently aware of were customs warehouses (53%) and temporary storage (43%). VAT unregistered businesses were most commonly aware of customs warehouses (47%) and Authorised Economic Operator (AEO) status (46%). Three in ten (30%) VAT registered businesses and 15% of VAT unregistered businesses were not aware of any customs facilitations.

Three in ten (30%) VAT registered and 6 in 10 (58%) VAT unregistered businesses reported awareness of the Common Transit Convention (CTC), although when prompted in the qualitative interviews, knowledge and understanding of the specifics of CTC were low.

In the quantitative survey, businesses were asked how their trading behaviour would change if full customs procedures and documentation were required for trade with the EU. Most businesses reported they would continue trading with the EU in this scenario: businesses reported they would do so by hiring an intermediary (38% of VAT registered, 50% of VAT unregistered) or by upskilling in-house (48% of VAT registered, 50% of VAT unregistered).

5. Sources of help and information

Less than half (44%) of VAT registered businesses looked to any sources of help or information in the lead up to 29 March 2019. The sources most commonly used were GOV.UK (30% of VAT registered, 33% of VAT unregistered) and the HMRC web pages (25% of VAT registered, 36% of VAT unregistered).

In the quantitative survey, businesses were asked which sources they used for help and information on EU exit more generally. The most commonly used sources were GOV.UK (58% of VAT registered, 39% of VAT unregistered) and HMRC web pages (55% VAT registered, 53% VAT unregistered). Although seen as easy to use, many businesses noted in the qualitative interviews that these government sources often lacked information specific to their business situation.

Almost 7 in 10 (68%) VAT registered and 4 in 10 (44%) VAT unregistered businesses recalled receiving letters from HMRC to help prepare their business for EU Exit. In the qualitative interviews, businesses described these letters having prompted them to apply for an EORI number. Two-thirds (69%) of VAT registered and half (49%) of VAT unregistered businesses had not heard of the government’s Brexit email alerts.

Half (54%) of VAT registered and 4 in 10 (39%) VAT unregistered businesses wanted more information from HMRC or the government about trading goods with the EU after EU Exit. These businesses wanted a range of information about various specific details, for example how procedures and processes would change. Most commonly, VAT registered businesses wanted to receive this information by emails from HMRC (70%) or by letters from HMRC (62%). 

1. Throughout this summary, all percentages relate to findings from the quantitative strand of the research ↩