‘It really is a nuisance’: Italy’s exporters on Brexit

At the end of the transition period for the UK leaving the EU single market, in January 2021, a few Italian businesses were not prepared. A couple wrote panicked emails to the Italian trade agency asking if Brexit meant they would no longer be able to export to the UK, or if they had to start paying custom duties on their exports. To their relief, the answer to both questions was no.

“I told them that, if it had been like that, we would have been in the middle of a trade war with the UK,” said Gabriella Migliore, who runs a Brexit help-desk at the Italian Trade Agency, or Agenzia ICE, speaking at a conference this year.

Instead, thanks to a last-minute EU-UK trade deal brokered in December 2020, tariff-free trade continued. Nevertheless, Italian exports to the UK have taken a hit — dropping sharply last year with the onset of the coronavirus pandemic, and now recovering at a slower pace than in other key markets.

SACE, the Italian credit export agency, expects growth of 5.3 per cent in Italian exports to the UK in 2021, but does not anticipate a recovery to pre-Covid levels until 2023. By contrast, it predicts the gap will be closed this year with Germany, France, the US and Japan, with double-digit increases in exports to their markets.

So, is UK trade falling behind because of Brexit? “It is somewhat premature to draw conclusions . . . but it may be a good clue,” says Fabrizio Botti, an international economics expert at the IAI think-tank in Rome.

In the first seven months of 2021, the UK was the sixth-largest market for “Made in Italy” products and accounted for Italy’s third-largest trade surplus after the US and Switzerland. Typical Italian exports to Britain — which peaked at more than €25bn in 2019 — include machinery, cars and car parts, pharmaceuticals, clothing, furniture, food, wine, clothing and fashion.

Brexit has introduced significant administrative burdens for Italian exporters, though, with paperwork and confusion about regulatory changes. That includes the UKCA product-safety mark for goods and services, brought in to replace the old CE mark in 2021. Compulsory use of the mark has now been largely postponed to 2023.

Even so, there is broad optimism — or, at least, hope — among Italian business leaders and policymakers that the UK will remain an important trading partner in future.

“Our paperwork production has increased,” says Annibale Pancrazio, the third-generation boss of Pancrazio, a family business that has long exported tinned food to the UK. “It is really a nuisance,” he says, noting that dealing with it “might sometimes require staff to stay late in the evening”. But Pancrazio, based near the Amalfi coast in southern Italy, does not consider Brexit an insurmountable obstacle.

“The Brits remain an attractive market . . . they may cook tomato sauce worse than us, but we don’t care as long as they keep buying it from us,” he says.

Food exporters are among those who have fared reasonably well on the UK market, partly thanks to panic supermarket buying during the pandemic.

SACE says it is the only export sector that kept growing through 2020 — and it is expected to grow further, at a rate of 2 to 3 per cent in the next two years.

On the other hand, sales of motor vehicles and machinery were the category worst affected by the Covid pandemic and are struggling to regain ground, according to the agency.

For Francesco Padovan, export manager for Coster Group, a Milan-based supplier of heating, ventilation and air conditioning systems with a branch in the English East Midlands, Brexit has “essentially been a bureaucratic and logistical challenge”. But the company worked hard to prepare for it, and will continue investing in Britain.

“Delivery times have nearly doubled and the cost is also very different,” he says. Yet “the UK is and will remain one of our main focuses,” with specific market products in the pipeline. Padovan says his company plans to expand its UK workforce. “We see the glass half-full and not half-empty,” he says.

The Brits may cook tomato sauce worse than us, but we don’t care as long as they keep buying it from us

Nicola Piovesana, an export manager who works for Serena Wines, a leading producer of Prosecco, agrees. “So far, our biggest problem has been Covid rather than Brexit,” he says. The company lost three months’ business in early 2021 to UK lockdowns. “Once the country reopened, our sales have been very, very strong . . . in terms of volumes, we are absolutely satisfied.”

Serena mainly supplies the hospitality sector and hopes to return to pre-Covid levels of UK sales by the end of the year. But looking ahead, Piovesana is less ebullient: he says the shortage of truck drivers that is affecting the UK economy “is starting to become a huge problem” which could turn it into “a less interesting country”.

For some, the question is whether there might one day be a way back from Brexit. “For now, it’s done, but perhaps this may change in a generation or two,” says Massimo Ungaro, a London-based lawmaker for Italy’s ruling Democratic party, who represents Italians living abroad. “Besides, they [the Brits] haven’t yet seen its true cost.”