A new, 67-page report by the UK National Audio Office (NAO) has highlighted a myriad of shortcomings with the UK Government’s post-Brexit goods border strategy.
The report spells out how an estimated £4.7 billion of taxpayer’s cash will be spent on implementing post EU exit border arrangements and improving border performance.
Moreover, the NAO concludes that the new border arrangements will cost traders £469 million a year in total (though some of these costs existed in relation to 3rd-country goods before the UK left the EU).
The NAO also described some of these costs as “unnecessary”.
Offering examples to back up this claim, the NAO report refers to the UK Government’s procurement or construction of sites at Dover White Cliffs and Dover Bastion Point. These cost a combined £62 million, only for it to be later decided they were not required.
Another example was HMRC’s £258 million in spending between 2020-21 and 2023-24, which was used to build and run 8 temporary border facilities to cope with demand that did not fully materialise.
How the report was conducted
The NAO explains that the aim of the report was to evaluate the government’s understanding of the cost and impact of its border model; the government’s approach to introducing import controls; the government’s plans to implement its 2025 UK Border Strategy; and the implementation of arrangements relating to NI.
In the process of carrying out the research, the NAO conducted over 30 virtual interviews and two teach-ins with officials from HMRC, Defra, the Cabinet Office, the Home Office and their relevant
arm’s-length bodies.
Interviews also took place with officials from HM Treasury, the Department for Business & Trade, the Department for Transport, and the Food Standards Agency.
A series of failures
In its key findings, the report includes a long list of blunders and shortcomings the UK Government has made concerning its post-Brexit goods border strategy.
First and foremost, as is well known, more than three years after the end of the transition period, full import controls are still not in place. There is also still uncertainty as to when full SPS controls will actually be in place.
Moreover, these repeated delays, of which there have already been five, have meant “ongoing uncertainty and increased risk” according to the NAO. Another negative side-effect has been that these delays have resulted in “slower progress on other elements of the strategy”.
In addition to this, the report concludes that the The Border Target Operating Model’s operation is “still to be tested” and that “the government may not be able to apply controls consistently as the controls are phased in”.
With regards to how this could have been avoided, the NAO suggests that the UK Government ought to have “established a clearer vision of how the border should operate from the start,” and should have taken “a more strategic and planned approach to implementation”.
On the flip side, one of the few positive findings in the report was the conclusion that the government’s new border target operating model should reduce costs to traders in comparison to its initial plans.
Future plans lacking in detail
Besides looking back on previous actions taken by the government, the report also casts its eye on the government’s current plan for realising its Border Target Operating Model aims.
With regards to this, the NAO report warns that there is no timetable for the realisation of the plan to use technology and data to facilitate the passage of legitimate trade. On top of this, the NAO writes that the Cabinet Office has not yet produced a comprehensive performance framework to measure how well the border is operating.
Continuing the theme, the report adds that the UK Government has no clear timetable for the implementation of its strategy to achieve its ambition of having “the world’s most effective border”.
In order to improve the situation, the NAO stresses that the government needs “strong mechanisms for delivery and accountability”, as well as a “more realistic approach to digital transformation, and the means to assess and report on border performance to enable improvement over time”.
Another concern highlighted by the NAO in its report was that numerous trade bodies had declared that late announcements about policy and uncertainty about the timetable for implementation of controls had reduced their ability to prepare for upcoming changes.
The scale of the post-Brexit bureaucratic burden
The report states that in 2022, traders made an incredible 39 million customs declarations on goods moving in both directions between GB and the EU.
Last year, the UK’s Animal and Plant Health Agency also issued 316,000 Export Health Certificates (EHCs) and 21,000 phytosanitary certificates in relation to the movement of SPS goods from GB to the EU (not including goods moved from GB to Northern Ireland).
The equivalent number this year will inevitably be higher due to the additional checks the UK Government has implemented.
The cost to business
In the report, NAO quotes Defra estimates stating that the annual cost to traders of complying with the SPS import controls it introduced for EU imports between January 2021 and December 2023 is around £54 million.
Moreover, as was mentioned earlier in this article, the UK Government estimates that the revised model will cost traders £469 million a year in total, although some of these costs have existed in relation to ROW goods since before the UK left the EU. The NAO says this £514 million less per year than the regime it originally planned to implement.
Additionally, there have been costs for UK-based businesses in the shape of lost business. The report spells out how UK-based traders have been operating at a disadvantage compared to their EU counterparts, something that has ultimately hit bottom lines.
The reason for this, as the report explains, is that “EU traders have been able to export their goods, other than those presenting a high biosecurity risk, into the UK without dealing with additional controls, while UK traders have had to comply with EU requirements such as Export Health Certificates (EHCs) resulting in additional costs to UK traders.”
Providing examples, the NAO said it had spoken to the National Farmers’ Union, who had said that the disparity had “created an issue for competitiveness, as the sector has to comply with EU requirements and the associated costs, and for biosecurity.”
Moreover, the NAO says that the British Poultry Council had told them that the poultry industry had “continued to face difficulties and significant losses as a result of ongoing imbalances in the new regime.”
Finally, another cost for business, though also a revenue stream for the UK Government, has been the customs duties that apply to goods that do not meet the ‘Rules of Origin’ requirements.
“In 2022-23, HMRC collected £5.8 billion in customs duties on the movement of all goods from the EU and the ROW.13 This compares to £3.3 billion in 2019-20, the last full year in which the UK and the EU were part of the same customs union and no customs duties were due on UK–EU movements,” states the report.
The report’s findings are very much in-synch with the views of industry bodies representing companies who transport goods or are involved in the import and export of goods between the UK and the EU.
Industry reaction
Prior to the introduction of the most recent sanitary controls last month, Phil Pluck, CEO of the Cold Chain Federation, warned:
“From the end of April many EU food businesses supplying the UK are going to have a substantial new administrative burden and considerably higher costs to send temperature-controlled products here. We can expect many to stop exporting to the UK at all, particularly small artisan producers. Those that do continue may see up to £1,000 added to the cost of one multi-consignment lorry entering the UK and will likely need to pass on a significant portion of those costs with higher prices.”
In a similar statement issued in April concerning the Border Target Operating Model, the Road Haulage Association said:
“We recognise the need to ensure a risk-based approach to maintain UK biosecurity. We urge that border checks are as efficient and seamless as possible on imports. Additional processing time could impact the wider economy through increased costs and administration, and any loss of perishable and temperature-controlled items. There are also concerns about the readiness of EU businesses and support infrastructure including lack of veterinary officers to carry out checks and the fact that the testing facility is located in Sevington – 22 miles inland from Dover.”
Another trade body who publicly shared its concerns with the changes was the British Association of Landscape Industries, who said its members were worried about the “efficiency of the proposed process as well as affordability of checks”.
Difficulties for small businesses
In a co-authored piece published on The Conversation earlier this month, Kamran Mahroof, Associate Professor for Supply Chain Analytics at University of Bradford, and Emilia Vann Yaroson, Senior Lecturer in Operations Management and Analytics at the University of Huddersfield, spelled out the costs for businesses.
“A small consignment of goods, with only five different products in the medium-risk category, such as poultry, milk or some fish products for example, would cost small importers £145,” warn the academics.
Breaking down that £145 figure, the article states:
“The maximum charge for one consignment will be limited to five product types. If a consignment is made up of different risk categories, the rate of the highest risk category applies to all the product lines. So if a consignment contains four low-risk product lines (totalling £40) plus one medium- or high-risk product line (£29), the importer will pay the maximum charge of £145.”
The experts add that larger retailers will be in a much better position to absorb these costs due to their bargaining power and resilient supply chains. Therefore, in a battle to compete, smaller importers may have to reduce the variety of their offerings and focus on low-risk products. Alternatively, they could simply raise prices of British consumers.
Photo by Ethan Wilkinson on Unsplash