Brexit Bites, 31 October 2017

Oct 31, 2017

With little clarity of when the Brexit talks will resume, HMRC was under the spotlight last week when it emerged that the new customs system might not be ready in time if the UK crash out of the EU without a trade deal.  In other developments, a report released this month shows that the economy of the border region on the island of Ireland will be significantly impacted by Brexit, while the Bank of England warns that 75,000 banking jobs could be lost due to Brexit.

New Customs system might not cope with a no-deal Brexit

Despite insistence from UK Chief Negotiator David Davis that the new customs systems that is being introduced in the UK is on track, the Chief Executive of HMRC Jon Thompson has reportedly said that there is no “guarantee” that it will be ready if the UK were to crash out of the EU without a trade deal.

The Customs Declaration Service (CDS) is expected to be in place by January 2019 and it’s estimated that customs declarations would increase three-fold if the UK leaves the EU and checks are required.

Mr Thompson reportedly told the Commons Public Accounts Committee last week that he could not give a guarantee that an IT system could work until after it is up and running and said the project did carry risks. It’s reported that HMRC would need up to £450 million additional funding as well as up to 5,000 extra staff if no deal is reached on Brexit.  

If HMRC are preparing for a no-deal Brexit, they may need to rely on the current customs system CHIEF (Customs Handling of Import and Export Freight) if CDS is not ready. The downside of this is that CHIEF is not compatible with the new EU law which mandates that all communications within a customs system must be electronic by December 2020.

With little clarity of how trade talks will go and therefore no clear indication of how much capability the new system will be required to have, HMRC are operating in difficult and uncertain times.

Study says the border region will be significantly impacted by Brexit

A report produced by 11 local authorities along the border between Northern Ireland and the Republic of Ireland shows that the economy of the border region will be significantly impacted by Brexit.  The study says that the border region already suffers problems such as productivity and lower incomes and these issues could be worsened on Brexit.

The research showed that there are around 87,000 businesses operating in the border region and approximately 40 percent of these are in the agricultural sector.  The report does suggest that this figure could be higher as it doesn’t take account of the self-employed working in the region in the agricultural sector.

Goods traded cross border total over €3 billion and while only 2 percent of the Republic of Ireland’s total exports go to Northern Ireland, the report shows that for businesses operating in the border region this cross border trade is vital. Trade in agri-food is particularly critical to the region and the report states that if tariffs were to be imposed, cross- border trade in this sector could fall by as much as 9 percent.

The report says that both Northern Ireland and the Republic of Ireland “continue to be dependent on a small number of markets. Part of this is due to geography and history – thus the British Isles remains the key market for most businesses located there.”

To encourage market diversification in light of Brexit, the report urges that all government bodies, including local government must work together to help businesses expand their reach.

Accountancy firms in the border region estimate that approximately 30 percent of their staff and 50 percent of their clients “straddle the border”.  The report says that as well as the free movement of people, cross border trade has been significantly helped by what is termed “border management”.   This includes cross-border co-operation between business groups, third level colleges, and voluntary groups.

The report urges that the success of the Irish border will depend on how much the current level of co-dependencies which exist across council areas will be able to continue untouched.

Brexit Shorts

  • More clarity needed on Irish border, says Minister Simon Coveney 
  • European Council President Donald Tusk hints that Brexit could be reversed with “no Brexit” reference
  • 75,000 banking jobs could be lost due to Brexit, according to the Bank of England
  • Michael Bloomberg reportedly says Brexit is “the stupidest thing any country has ever done” aside from the election of Donald Trump

Read all of our Brexit updates on the dedicated Brexit section of our website.