UK’s border plan leaves business still searching for answers

UK’s border plan leaves business still searching for answers

The government has published its blueprint for how the UK-EU border will operate at the end of the Brexit transition period.

The Border Operating Model (BOM) sets out how British traders will manage imports and exports with Europe after the UK leaves the bloc’s single market and customs union on December 31 this year.

The 206-page document covers the gamut of new bureaucracy and customs processes that will be phased in over a six-month period, with the border to be fully operational from July 1 2021.

What new controls will be needed?

At the end of the transition period the UK will become a “third country” in EU parlance, meaning that its exports to Europe will face the panoply of customs checks, including changes to VAT rules, animal and plant health checks and safety and security declarations.

The precise nature and extent of the checks will depend on the outcome of EU-UK negotiations, but they will be substantial. Some 150,000 companies will complete customs formalities for the first time, with an estimated 215m extra declarations per year, according to government officials, which could cost an additional £7bn.

What preparations has the government made?

The government is in the process of rolling out the digital and physical infrastructure needed to operate the new border.

This includes an estimated 10-12 physical inspection sites dotted across the UK for checking lorries and ensuring that trucks have documents all in order before they reach the port. Officials say contracts for the sites have still to be signed.

A new computer system, the Goods Vehicle Movement Service (GMVS), is still in development that will enable exporters to pre-declare their shipments. Trucks with incomplete paperwork will not be allowed to board ferries or trains.

Consultation is also about to begin on a new Smart Freight phone app for lorry drivers to use to pre-declare goods, with drivers facing spot-fines if they approach the port before being given the green light.

The government has also announced an additional £50m in grants and subsidies to help with training the estimated 50,000 customs intermediaries that will be needed. It has also opened an online customs academy.

Business, logistics and freight associations have repeatedly expressed concerns that these systems are still not operational and available for testing with less than six months to go before the new measures come into force.

Which sectors will be most affected by the changes?

Manufacturing and retail will be among the industries hardest hit. Both have come to rely on complex “just in time” supply chains involved in the delivery of everything from fresh food for the UK’s supermarkets to car-parts and other intermediate manufacturing inputs.

About half the food consumed in the UK is imported, with four-fifths of food imported from the EU alone. 

This will be very expensive, very time consuming and even now — in July — we still don’t fully know what we are preparing for

William Bain, Brexit and trade adviser at the BRC, which represents the retail industry, said the changes would affect consumer choice and availability. Customs forms could cost as much as £7.5bn every year just between Britain and the EU, he added.

“This is a product of all the red lines from both sides in the negotiations,” he said, pointing to the extent of the checks that will be needed on goods travelling between Great Britain and the EU.

Ben Fletcher, head of policy at Make UK, which represents the manufacturing industry, said that the industry faced major disruption under the plans, with half of all exports going to Europe from the UK and many firms only trading within the EU.

“This will be very expensive, very time consuming and even now — in July — we still don’t fully know what we are preparing for. There is a real nervousness among manufacturers.”

How is business preparing?

The government says that business can make some basic preparations that will be necessary regardless of the outcome of the negotiations. These include obtaining an economic operator “EORI” identification number for GB imports, finding a customs broker or intermediary and opening a duty deferment account (DDA) and a VAT-registration if needed.

But business remains deeply concerned about both the lack of clarity on systems and software, as well as the shortage of customs intermediaries to help businesses complete what the government concedes is “complicated” paperwork. 

This is particularly so for animal and plant products. The Food and Drink Federation warned the lists of different processes set out in the document would be “bewildering” for many operators. 

The lack of customs agents is the single biggest cause for concern. Although 50,000 are needed, FT research has shown that the three largest training organisations in the UK last year put fewer than 2,500 people through customs training courses, with many participants augmenting existing skills rather than being new entrants to the freight forwarding workforce.

Richard Burnett, chief executive of the Road Haulage Association, said this remained the biggest constraint to operating the new border. “The document keeps referencing ‘go and find a customs intermediary’ but we don’t have enough of them, and recruiting them is still the biggest challenge,” he said. 

What would a Canada-style trade deal mean? 

Although signing a “zero-tariff” Canada-style free trade agreement with zero quotas on goods would be smoother than a “no deal”, it will still lead to a high-friction border.

For example, UK exporters would still need to demonstrate that their products were at least 50 per cent UK-made, which can itself require large amounts of paperwork.

The EU might agree to reduce some checks if the deal included a New Zealand-style veterinary agreement that could cut physical checks from 10 per cent to 1 per cent. This would ease the border flows, but not the overall bureaucratic burden.

Or a ‘non-negotiated’ exit on to WTO terms?

This would be much more complicated. UK exporters would face full tariffs on goods entering the EU, while importers would have to pay the UK’s ‘Global Tariff’ schedule on all EU products, with high tariffs particularly on foodstuffs.

Michael Gove, the cabinet office minister, has already conceded that food prices are likely to rise and that the friction from leaving the EU without a deal “would impose additional costs on food production here”.

The lack of agreement will almost certainly cause a shortage of trucking permits, longer queues at the border and massively increase other complications, such as registering chemicals for use in both the EU and UK.