LIAM SMYTH
AS THE Brexit political point scoring continues, there is one subject that should be a concern for all businesses and that’s whether the UK will remain part of the Customs Union with the EU after Brexit.
The simple truth is that doing business will be a lot easier if we are and a lot more difficult if we’re not. That’s not a political point, it’s just a fact based on the World Trade Organisation rules. After Brexit, the UK will be a ‘third country’ to the EU and that means that our borders are unlikely to be as open as they are now. To understand what might change is relatively easy, you just have to look at what happens at the border when countries outside of the EU customs union trade to or from it.
Global trade agreements are protectionist by their nature, both sides will limit imports of indigenous products to protect their economy and jobs. As an example, in the EU we limit imports of most food and agriculture products because we produce lots of it but we have free trade in textiles and tea because we don’t produce those products at any scale.
The way that we protect trade from outside our customs union is by accounting for it through a rules-based global trading system. A customs declaration is one element and an integral part of that system. The reason for declarations is simple, they indicate when taxes and tariffs are due to be paid.
Now, the good thing about a customs union is that the 130,000 UK firms that only trade in EU countries don’t have to make customs declarations, at the moment. HMRC estimate that if they do, then the number of declarations will increase by 200 million. The scale and cost of this task will be massive for business and for HMRC. Indeed HMRC is spending over £200m upgrading and expanding the current IT system to handle the extra work and have said that they will need to employ thousands of extra customs officers.
But it’s the impact on businesses that’s of greatest concern. Most SME’s tell us that they’re waiting for certainty before making any firm plans despite the indicative changes that will take place after Brexit. While the final settlement is still to be fully negotiated, there are steps that businesses can and should take now to start planning ahead.
Liam Smyth is deputy chief executive of Aberdeen & Grampian Chamber of Commerce.
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