NAO reports on post-Brexit border unreadiness
9 November 2020: A National Audit Office report on UK border preparedness for the end of the Brexit transition period has concluded that while progress is being made, significant disruption is likely, as many traders and third parties will not be ready for new EU controls.
The National Audit Office has published a report examining whether the UK borders will be ready for the end of the transition period on 31 December 2020 and concluded the answer is ‘probably not’.
The report contains some rather worrying forecasts. Currently, HMRC process about 55 million customs declarations every year and this is expected to rise to 270m transactions as a result of leaving the EU Customs Union, an increase that will be challenging to deal with. The Government’s worst-case scenario envisages 7,000 lorries queuing to cross the Channel with between 40-70% of laden lorries travelling to the EU not expected to be ready for EU customs requirements.
In January 2020, the Government instructed departments to plan on the basis that there would be no trade agreement with the EU, which in theory should mean they will be ready for no deal involving tariffs at borders as well as for a trade deal that would still involve extensive customs declarations.
Unfortunately, preparations that were already rated as high risk were put on hold due to the emergency response to COVID-19, including high-risk IT systems, infrastructure, data, customs agents’ capacity and trader/haulier readiness. Communications to traders and industry were paused and did not resume until July 2020.
A decision had already been taken by the UK to partially waive import controls for the first six months of 2021, which will make it easier for many traders, as they will not have to make full import declarations initially. This will present an increased fiscal risk, whilst import controls are phased in over the six months to 1 July 2021, although high-risk traders (such as those importing alcohol and tobacco) will need to make import declarations from day one.
This relaxation is not expected to apply to trade in the opposite direction, with the EU indicating that it will apply full customs and regulatory controls from 1 January 2021. This will be difficult for businesses that are not familiar with cross-border transactions outside of the context of the EU Customs Union and Single Market.
Departments hope to be able to deliver a minimum operating capability by 1 January 2021, since the requirements are similar to those needed for previous no-deal agreements that they have already planned for. However, there are uncertainties as to how many traders will be in a position to use transit facilities, given the investment in systems required.
Software providers have had little time to develop new software to integrate with government systems at ports, for example. The Border and Protocol Delivery Group is working with departments to develop contingency plans if systems are not operational in time and agree dates by when those plans must be invoked.
Many businesses will need support from the customs intermediary sector, but it is probably not resourced to deal with the potential demand. The Government has provided £84m (£50m since June 2020) to cover training, recruitment and the development of IT systems by freight forwarders and other customs agents, but this may not be sufficient.
A new online service is to be launched called ‘Check an HGV’ so that hauliers can check and self-certify that they have the correct documentation for EU import controls before travelling, with the added requirement to obtain a permit to drive on prescribed roads in Kent. There are also contingency plans in place so that the supply of critical goods and medicines is not held up.
There is also a challenge around implementing the Northern Ireland Protocol by 1 January 2021, where there are many changes to intra-UK trade as well as trade with Ireland, with little time in which to implement them. There is uncertainty as to the detail and extent of the new requirements, which are dependent upon ongoing negotiations. HMRC has the unwelcome task of reconciling all the different systems with the Protocol and there is little opportunity for testing out the new software. Northern Ireland’s Department of Agriculture, Environment and Rural Affairs is hampered in making progress by the lack of clarity about the level of checking that will be required and is likely to have to put contingent plans in place.
The Government’s £200m Trader Support Service (TSS) is yet to be delivered, with the contract to provide it not having been finalised as at 16 October 2020. The TSS appears to be vital to supporting traders with goods moving from Great Britain to Northern Ireland and Ireland in particular, causing further concerns about the effect on trade across the Irish Sea.
Commenting on the report Alison Ring, director for public sector at ICAEW, said: “There is a huge effort going into getting the country ready for new trading arrangements now less than two months away. Relaxing import requirements for the first six months of post-transition period trade will provide some relief, but as the NAO makes clear, there is a likelihood of significant disruption as traders adapt to import and export requirements on previously ‘frictionless’ trade flows, irrespective of whether a trade deal is agreed with the EU or not.
“There are some doubts as to whether all the systems needed will be fully operational by 1 July 2021, with the Government providing funding to port infrastructure and customs intermediaries to cover costs that would traditionally be covered by the private sector to be ready in time.
“The NAO report comments on how a lack of preparedness and clarity about the requirements have hampered the Government’s ability to deliver such a major change cost-effectively. Underinvestment in planning has – yet again – resulted in significant sums of public money being wasted.”