Summary
The UK freight industry and British Chambers of Commerce have explicitly called for an extension of the transition period in E/UK relations, while the UK food and drinks industry has called for concerted action to avoid further trade disruptions which would compound the adverse economic effects of the Covids-19 pandemic. UK private sector bodies maintain neither business not the UK border services are prepared to implement customs and other border controls on trade with the EU from the 1st January 2021, given the disruptions to preparations which the Covid-19 pandemic has generated. While these difficulties are recognised and there is a dawning awareness in the UK government of the need to avoid a no-deal exit from the EU customs union, it appears no one in the UK government knows how politically to avoid this outcome. Against this background ACP businesses will need to start making preparation for a no-deal UK departure from the EU customs union and single market on 1st January 2021.
British International Freight Association (BIFA) has warned ‘the freight industry will be unable to cope with significant change in the UK’s trade terms with Europe if the Brexit transition period is not extended’. It has been highlighted how ‘BIFA members are in no position to respond to a second massive shock if there is significant change in the terms of trade with the EU at the end of the year’ because the COVID-19 pandemic has ‘knocked side-ways’ freight businesses, who have had to either furlough staff who should have been busy with post-Brexit preparations or re-deployed them to deal with the immediate COVID-19 freight crisis (1).
It was highlighted how in regard to future relations with the EU, ‘many of the civil service resources previously assigned to support negotiations have been reallocated to deal with the coronavirus emergency response’, with as a consequence there being little progress in the negotiations and necessary preparations for the UK’s withdrawal from the EU customs union and single market (1).
BIFA director general Robert Keen labelled a refusal to extend the period as ‘very risky’, arguing there is a growing view that ‘an extension to the transition period remains likely’ with it now mainly being about when this decision will be made (1).
This view was endorsed by Alex Veitch, head of international policy at the Freight Trade Association, who said ‘planning for an exit from EU rules at the same time as navigating the coronavirus crisis was not possible’, since it is the ‘same people wrestling with the international freight challenge who would be the ones planning the Brexit challenge’. In this context he took the view ‘asking for an extension was a “reasonable” demand’ (2).
The British Chamber of Commerce takes a similar view, arguing insufficient investment has been made in preparing businesses for the introduction of a customs border between the UK and the EU. It was pointed out ‘between 150,000 and 250,000 companies who trade with the EU will be filling in customs forms for the first time’ once the UK leaves the EU customs union. The fear is that for many traders dealing with COVID-19 pandemic, dealing with ‘the problem of making 250 million more customs declarations at the end of the transition period’, will be a challenge to far (2).
So far only ½ of available UK government funding has been drawn down on, with ‘just 878 firms having received a total of £17.5 million’, out of the potential pool of 250,000 who will need to prepare for the challenge of dealing with an EU/UK customs border (2).
UK government agencies however are far more optimistic. HM Revenue and Customs maintains thousands of training courses have been prepared, with IT hardware upgrades also underway. However, prior to the introduction of COVID-19 lock-down and social distancing measures only 99 of 540 courses planned at the UK Customs Academy had been held, with around 46% of these courses being for customs intermediaries who provide services in completing customs formalities for other businesses (2).
In terms of UK government capacities to deal with a new customs border with the EU, so far, some 5000 new posts have been created, in a context where officially endorsed estimates suggest a further 50,000 customs agents are required (2).
Meanwhile a multiplicity of the UK food and drink industry bodies have signed on to a joint open letter to the UK government stressing the centrality of the food and drink industry to the UK economy and the importance of all governments ensuring ‘trade continues to flow freely and without restrictions, wo that together we can come through this incredibly difficult time stronger than ever’. While no explicit reference is made to extending the transition period in EU/UK relations, the emphasis on the critical importance of keeping ‘imports and exports of food and drink flowing’ and the integrated nature of UK supply chains makes it clear that the future well-being of the UK food and drink industry depends on avoiding further disruptions to existing trade relations (3).
| Comment and Analysis There are genuine concerns that while there may be a growing awareness in certain parts of the UK government of the need for an extension of the transition period to avoid a no-deal Brexit in the context of Covid-19 economic disruptions, the fear is t no one in the UK government knows how to deliver this politically (4).Senior German politicians and allies of Chancellor Merkel take the view agreeing ‘even a minimal outline free trade agreement this year’ is now highly unlikely. The Covid-19 pandemic has created a situation where talks are a long way behind schedule, with little progress having been made via video conferencing arrangements during the 3rd week in April (4). Responsibility for averting a no-deal outcome at the end of 2020 is seen as lying in the hands of Prime Minister Johnson. It is felt Prime Minister Johnson needs to ‘realise the consequences of a disorderly exit amid this pandemic’ (4) and take the necessary steps to avert such an outcome. Meanwhile UK negotiators continue to insist there is enough time to conclude negotiations before the end of the year (6), with the UK legally unable to seek an extension of the transition period. Prime Minister Johnson may be banking on an initiative to resolve the impasse under the German Presidency of the EU Council, which begins on 1st July 2020, given Chancellor Merkel’s reputation for compromise and consensus building. However, this needs to be balanced against the need for the German government to avoid compromising its position within the EU27, in the face of pending German Federal Government elections. What is clear is ACP businesses like UK businesses will need to start preparing making preparation for a no-deal UK departure from the EU customs union and single market. A ‘no-deal’ UK departure would carry not only important implications for ACP exporter serving the UK market via initial ports of landing in the EU27 but would also be likely to create increased administrative complications for ACP exporters trading directly into the UK market. It would also, in all probability, give rise to a radical review of the UK’s MFN tariff schedule to the detriment of over £1.5 billion of ACP exports to the UK market. |
Sources:
(1) The Loadstar, ‘Brexit transition must be extended, or freight operators won’t cope, says BIFA’, 23 April 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/2020/04/23/Brexit-transition-must-be-extended-or-freight-operators-wont-cope-says-BIFA
(2) BBC, ‘Firms ‘won’t be ready for EU customs exit’, 21st April 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/2020/04/21/Firms-wont-be-ready-for-EU-customs-exit
(3) specialityfoodmagazine.com, ‘An open letter to Government, from the food and drink industry’, 16 April 2020
https://www.specialityfoodmagazine.com/news/an-open-letter-to-government-from-the-food-and-drink-industry
(4) The Observer, ‘UK will need to extend Brexit transition, Merkel ally warns Britain’, 26 April 2020
https://www.theguardian.com/politics/2020/apr/26/brexit-want-to-leave-the-eu-youll-need-two-more-years-merkel-ally-warns-britain
(5) Guardian, ‘Britain running down the clock in Brexit talks, says Michel Barnier’, 24 April 2020
https://www.theguardian.com/politics/2020/apr/24/britain-running-down-the-clobrexit-talks-says-michel-barnier-eu
(6) Guardian, ‘Who is involved and what is being covered?’, 24 April 2020
https://www.theguardian.com/politics/2020/apr/24/who-and-what-uk-and-eu-resume-interupted-brexit-talks-future-relationaship