#Brexit: UK Lords report estimates 'no deal' will cost £18 billion per year to UK traders

The UK's second chamber, the House of Lords committee have released a report estimating that a 'no deal' Brexit will cost UK traders as much as €20 billion per year; a cost that puts the UK's annual contribution to the EU budget of around €10 billion into context. The EU External Affairs Sub-Committee of the House of Lords published a report today (20 September) on the Government's Chequers proposal for a Facilitated Customs Arrangement (FCA) and the customs challenges under 'no deal'. The report finds that under the FCA, UK importers would face an administration cost of £700 million per year – a fraction of the annual £18 billion 'no deal' cost to UK traders. 

Facilitated Customs Arrangement 

The Chair of the EU External Affairs Sub-Committee, Baroness Verma, said: 

"The Government must, as a matter of urgency, provide answers to questions on the Facilitated Customs Arrangement, such as how goods would be tracked, how revenue would be collected and how the repayment mechanism would work. With only six months to go until Brexit the clock really is ticking on a mutually acceptable customs agreement."

The sub-committee raised a number of ‘significant’ questions that need to be resolved for the FCA to be workable and acceptable to the EU. They say that the Government has not yet made clear how goods under the FCA could be reliably tracked and who would carry liability for keeping EU and UK-destined goods separate. The UK's proposal to collect revenue on behalf of the EU makes agreement difficult as the EU’s chief Brexit negotiator has stressed that the EU will not delegate duty collection to a non-Member State. 

According the evidence gathered by the committee the FCA's repayment mechanism is untested and will take several years to be developed and implemented. The committee interviewed Her Majesty’s Revenue and Customs, HM Treasury and the Department for Exiting the EU, as well as trade experts.  

Part of the implementation of the FCA relies on the establishment of new trusted trader schemes and maximising their take-up. The Committee recommended simplifying the application process to facilitate access for small and medium-sized enterprises and newly established businesses. 

No Deal – or the 18 billion pound question 

Baroness Verma said: "A 'no deal' Brexit will cause disruption – mitigation options are limited and no technology currently exists, which would eliminate border checks completely. Even if the UK waived customs checks on goods arriving from the EU, the EU has said that it will not reciprocate." 

The committee’s report says that in the case of 'no deal', trading with the EU under WTO rules would be disruptive and costly. Up to 245,000 businesses currently trade exclusively with the EU and would have to gain expertise in complex customs procedures, which they do not yet have. They could choose to outsource part of the customs procedure, but at a cost. 

Checks to the customs paperwork and time-consuming regulatory checks on some goods would cause delays at roll-on/roll-off ports and disrupt highly integrated supply chains. The committee also say that the Government’s position that, in the event of 'no deal', customs checks of EU goods could be unilaterally suspended to keep goods moving, may be in breach of WTO rules.