Britain will be hit by huge border delays, require vast lorry parks in the south-east, and suffer more than £1bn a year in economic damage, according to a stark economic analysis of the likely impact of customs checks after Brexit.
Additional costs associated with potential motorway queues, extra customs staff and jobs lost as a result of companies relocating mean even that assessment is “extremely conservative”, a study by a leading economic consultancy warns.
The alarming assessment, by the Europe-wide Oxera consultancy, sets out what it describes as the most likely impact of the new border checks imposed after Brexit. The warning comes after Michel Barnier, the European Union’s chief Brexit negotiator, ruled that the government’s hopes of securing “frictionless” trade outside the EU was not possible. It also follows a week in which cabinet Brexiters signalled they were ready to adopt a comprehensive transitional deal for up to three years, as ministers attempt to buy time to tackle a series of unresolved policy challenges raised by Brexit.
The complexities of creating a new customs regime as close as possible to the current arrangements is one of the major concerns for the Treasury, as it seeks to avoid serious disruption. Tory MPs are already sounding the alarm over potential gridlock at the border.
The Oxera analysis paper, written by its head of transport Andrew Meaney and seen by the Observer, finds that the most likely outcome would be a scenario it describes as “slow trade: low regulation, high enforcement”.
“Enforcement is either undertaken at the ports, or on a random checks basis,” it states. “However, the number of staff involved increases substantially, and many consignments are subject to lengthy checks.
“We estimate the impact of such a scenario to be at least £1bn per year. This is an extremely conservative estimate – it does not account for the economic costs of the uncertainty involved, the extra staff needed (for hauliers, ports and customs officials), the congestion associated with calling Operation Stack [which sees the M20 used as a makeshift lorry park], the land required for the additional customs checks [in the form of lorry parks], or of the wider economic impacts of jobs moving overseas due to uncertainty over the operation of just-in-time logistics. The full cost is likely to be much higher.”
The study also sounds the alarm over a new customs IT system due to be delivered just as Britain leaves the EU.
“It was agreed well before the referendum was announced that the current HMRC customs clearance system, CHIEF, would be replaced in March 2019,” it states. “It’s now due to be delivered just before we leave the EU and, having been planned to deliver 60m clearances per annum, it will now need to deliver 300m per year, with no understanding yet of what the customs deal with the EU looks like.”
An HMRC spokesman said the new system was “on track for delivery by January 2019”.
“We took the decision to bring in a new declaration system before the EU referendum, but the service remains fully capable of dealing with how the UK’s exit from the EU will impact on customs declarations at the border.”
Charlie Elphicke, the Conservative MP for Dover and Deal, said the report “underlines why we must take action now to ensure we are ready on day one for every eventuality. With fellow MPs, I have been urging the Treasury to move faster in preparing our border for Brexit,” he said. “Especially to take on board that the border is a tax point – not a search point – and that with digital borders, customs clearance can be managed incredibly quickly. In Singapore, clearance takes less than a minute.”
Tim Waggott, chief executive of the Port of Dover, said that issues around a new set of customs clearance and border control procedures “are acute”.
“In 2016, almost 2.6m freight units and over 12 million passengers transited the port,” he said. “Maintaining fluidity at the Dover Straits to protect and promote UK-European land-based trade flows must be one of the key imperatives during the Brexit talks.”
The Oxera report warns that past delays in building the new lorry parks risk motorway tailbacks in Kent. It says that the impact of delays and checks, known as “non-tariff barriers”, risks forcing companies to move supply chains into the EU. “Clearly, the UK elements of this chain are at risk if the cost and uncertainty created by customs checks (which can vary considerably in duration) are deemed to outweigh the benefits of doing business in the UK,” it states.
It adds that a solution is needed urgently, as businesses need to know “very soon the customs rules under which they will be trading”.
“The decision cannot be part of a last-minute deal on the eve of Brexit, due to the time it will take to get trade moving under the new arrangements,” it states. “The costs to logistics businesses and their customers, users of the road network and, eventually, jobs in the UK of a relatively limited increase in friction will be considerable.”
A government spokesman said: “The relationship we’re seeking with the EU has been set out in the white paper and Lancaster House speech. We want a comprehensive free trade agreement and a new customs agreement which allows for trade which is as frictionless as possible – this is in the interests of businesses in the UK and across the EU.”
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