In less than 100 days, the UK faces the biggest change in trade rules with the EU since the European single market was launched in 1993 — whether a new trade deal is agreed or not. Now the government is warning of a “reasonable worst-case scenario” of two-day delays in getting freight across the Channel and queues of 7,000 lorries in Kent. This is not a rerun of “Project Fear”. Finding ways to mitigate disruption is vital to limiting economic damage in the midst of a pandemic, and to making a long-term success of Brexit.
Since Britain will leave the EU customs union and single market whether it strikes a trade agreement or not, the end of the Brexit transition period will in many ways turn back the clock, overnight, to 1992. Since then, however, commercial Channel crossings have mushroomed from 1m to about 3.5m a year; organisations handling customs arrangements in Kent have shrunk from about 200 to 17.
An estimated 275m new customs declarations will need filling in annually post-Brexit, costing about £15bn. Some big exporters know what is involved. But sending whole containers of goods on a 30-day crossing to, say, China, is very different from much UK-EU trade, involving small shipments arriving just in time without warehousing.
The government estimates that even under its worst-case scenario, disruption will last only three months. Businesses and hauliers will no doubt rally round to limit the disorder. But delays to thousands of outbound trucks will also hold up imports on the same vehicles. Disruption will fall heavily on certain regions and sectors — such as pharmaceuticals, food and drink, chemicals, and automobiles — which could result in longer-term scarring to businesses and supply chains.
This week’s “shock and awe” letter from Cabinet Office minister Michael Gove apparently aimed to jolt traders into accelerating preparations. The biggest potential cause of disruption, it says, is “traders not being ready” for EU controls. With an estimated 50,000 new customs agents needed, Whitehall is baffled the industry has not taken up more of the £84m it made available to take on staff. Brokers say caps on grants to individual companies and uncertainties over a trade deal have created disincentives to hiring.
The freight and logistics industry says it has been raising alarms with government and clamouring for the information it needs to prepare for months. An IT system to help drivers determine if paperwork is in order will not be launched even in beta testing until next month. Key questions, such as whether tariffs will be required, remain unanswered as trade talks continue. Despite coronavirus, the government chose not to request an extension to the transition period.
It is too late to reverse those decisions or for blame games. The priority now is to do everything possible to limit trade disturbances. Trust, co-operation and communication will be needed between government and business, and these have been in short supply. Whitehall must provide as much information as possible despite the constraints of continuing negotiations. Securing a deal, of course, would lead to fewer trade frictions.
Deal or no deal, maximum flexibility will be required from governments, tax and customs authorities on all sides. The UK is not requiring importers to produce customs declarations or pay tariffs before July 2021. Since outbound disruptions will depend in part on how much flexibility EU members are ready to show, Britain’s threat to override commitments in its withdrawal treaty looks ever more ill-judged.