Border customs checks after the UK leaves the European Union could cost £1 billion a year and cause delays for goods being shipped in both directions, according to a report by Oxera, an economic consultancy.
The estimate assumes low regulation but high levels of enforcement and is based on World Trade Organization data on the cost of trading across borders, Andrew Meaney, a partner at the Oxford, England-based policy analyst, wrote. The UK's Brexit from the EU is scheduled for the end of March 2019.
Mr Meaney described the figure as “extremely conservative”, saying it does not take into account the economic costs of uncertainty involved, extra staff, traffic congestion or land on which to conduct the checks, and said the actual number would likely be much higher.
He called on the British government to prioritise the issue when it returns from its summer recess in September.
“Business in both the UK and the EU needs to know very soon the customs rules under which they will be trading,” he wrote. “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.
The report cites figures from the port of Dover, that point to 45 minutes as the average time to check lorry loads of goods currently arriving from outside the EU. These vehicles, roughly 3 per cent of Dover port traffic, will already have been checked on entering the EU in the first place.
In transit
Looking at the impact on Irish goods in transit, the report says: “Post-Brexit, adding four of those checks (at an Irish port, at two English ports, and then a French one) on to each consignment of Irish goods starts to look unpalatable.”
It notes that up to two-thirds of all Irish exports to the continent move via the UK.
“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,” Mr Meaney notes. The report does not consider the impact on jobs in countries other than the UK.
Failure to do a deal on customs union would have “extremely serious consequences for the UK economy”, says Mr Meaney, who added that providing policy direction in this area should be a priority for the British government when parliament returns from its summer recess.
Mr Meaney’s report outlines four possible scenarios, ranging from low levels of regulation and enforcement, which is most similar the current system, to high levels of both – something the Port of Dover has described as “Armageddon”.
Border protocols
As an example of the issues arising from any change to border protocols, the report refers to the planned replacement of the UK revenue’s customs clearance IT system. The new system is due to come into operation in March 2019. That date was set before the decision was taken on Brexit.
“It’s now due to be delivered just before we leave the EU and, having been planned to deliver 60 million clearances per annum, it will now need to deliver 300 million per year, with no understanding yet of what the customs deal with the EU looks like,” the report says.
While the British government still seems determined to leave the single market and customs union that currently give Britain free, frictionless trade with the bloc, it has signalled that it is moving toward agreement to seek a transition period of up to three years.
That could give businesses a better chance to adapt and ministers longer to work out technical details. – Bloomberg
