UK supply chains face £15bn annual freight admin cost rise from no-deal Brexit
New government estimate takes into account only the administrative burden from completing additional import and export customs declarations for UK-EU goods movements if Britain leaves the EU without a withdrawal agreement
UK supply chains face an additional £15 billion (US$18.5 billion) annual cost burden in the event of a no-deal Brexit, according to new government estimates published today that only take into account the extra administrative cost of completing import and export customs declarations for UK-EU goods movements.
Under the ‘HMRC impact assessment for the movement of goods if the UK leaves the EU without a deal’ document, UK customs body HMRC looks at the new declarations and costs for five different groups of businesses, differentiated by their trade volumes and whether they will use intermediaries to do their declarations or do them in-house: High-volume large traders – insourced; High-volume large traders – outsourced; Fast Parcel Operators; Low-volume, small traders – VAT registered; Traders below VAT threshold.
Noting that because these different types of businesses “will interact with customs in different ways, the costs they incur are different”, HMRC estimates that the costs will vary between £15 and £56 per declaration.
It noted: “The latest static estimate for the annual administrative burden on UK businesses from additional import and export declarations is £7.5 billion – updated to reflect 2017 data – with import declarations accounting for around half of this figure. The £7.5 billion estimates the administrative burden of completing customs declarations for all EU trade in goods movements.
“This is a static calculation of the burden, if 2017 EU trade flows were treated in the same way as non-EU trade flows and does not take account of any temporary easements which have been introduced to reduce these costs.”
The assessment added: “Additional administrative costs will also apply to businesses on the EU side of the border because an export declaration from the UK will need to have a corresponding import declaration into the EU and vice versa. Analysis of the trade statistics evidence base, used by the World Bank in compiling their ‘Doing Business Report’ (2017), suggests costs of completing customs declarations are broadly similar in the EU and the UK.
“HMRC therefore estimates that the static total ongoing administrative burden on UK-EU trade is £15 billion (updated to reflect 2017 data) a year. Considering the costs on both sides of the border is required to understand the impact on UK-EU trade, as costs imposed on UK or EU businesses will have wider implications for supply chains, and therefore for consumers and businesses in either market.”
The assessment also noted that “there will be one-off costs to businesses that currently trade only with the EU who will need to familiarise themselves with how to complete customs declarations for the first time. Further training costs will be incurred as businesses upskill themselves and their workforce in the declaration process.
“To help mitigate the impact, the Government has made available £24m to support training and IT costs for intermediaries and an additional £10m to support the costs of hiring new customs agents. However, it is estimated that the majority of UK businesses who currently trade with non-EU countries, and therefore already have to comply with customs obligations, use the services of an intermediary or agent – that is, customs broker, freight forwarder, logistics provider – to complete the declaration on their behalf and fulfil their customs obligations.
“It is, therefore, anticipated that many UK businesses currently trading exclusively with the EU – estimated to be in the region of 245,000 (of which 145,000 businesses are above the VAT threshold) – will follow this model and also use intermediaries and agents in order to comply with these new obligations.
“There may be costs to businesses associated with finding and familiarising themselves with intermediaries’ services. However, the cost of intermediaries completing customs declarations on a business’s behalf is included in the estimates.”
The full document can be viewed via this link: https://www.gov.uk/government/publications/hmrc-impact-assessment-for-the-movement-of-goods-if-the-uk-leaves-the-eu-without-a-deal/hmrc-impact-assessment-for-the-movement-of-goods-if-the-uk-leaves-the-eu-without-a-deal-third-edition#section-b