Brexit – Customs borders will impose costs and delays

Abstract

▀ The UK's decision to leave the EU customs union is likely to see physical customs borders being introduced, including in Ireland. This will impose administrative costs and delays, with our modelling suggesting that introducing customs checks would reduce the level of UK GDP in 2030 by between 0.7–1.3%. But there are opportunities for the two sides to limit the damage through cooperation and the UK could also mitigate the costs by agreeing free‐trade agreements (FTA) with third countries. ▀ The UK can take as ‘light‐touch’ an approach to customs checks on imports from the EU as it desires. But it is likely that the EU will introduce customs checks on goods imported from the UK, even if the two sides agree an FTA, to ensure regulatory compliance and that ‘rules of origin’ have been satisfied – this will be particularly important if the UK agrees FTA with countries the EU does not have deals with. ▀ Introducing customs borders would pose some logistical problems, particularly in the Dover Strait where existing infrastructure is limited and there are space constraints. A potential fivefold increase in customs declarations will also pose challenges on the IT front. If the UK and EU are unable to agree transitional arrangements, then the additional infrastructure would need to be up and running in a very short period of time. This risks a period of substantial disruption. ▀ Traders will have to complete additional paperwork – such as export licences and import declarations – but much of this can be dealt with electronically, which should help to limit costs and delays. In addition, if the two sides were to share information then this could help to limit the extent to which risk‐based inspections caused delays. ▀ The Government is effectively calculating that the benefits from agreeing FTA with other countries will outweigh the costs of customs controls on the UK‐EU border. This judgement looks doubtful and, at best, would take many years to bear fruit.