Good afternoon. Last week it was the Dover border chaos in the news but this week, another aspect of post-Brexit mobility friction hit the headlines — schoolkids and musicians.
The FT wrote about the “Kafkaesque” experience of a French school having 12-year-old children refused visas for an organised trip to Stratford (the kids were a flight risk, apparently); while the Guardian reported on the German punk band Trigger Cut being turned back at Calais, apparently for having day jobs. (One is a landscape gardener and the visa rules say you can’t have a separate day job when using the Permitted Paid Exemption route. Who knew? Not them, it seems).
Still, it is good to know that the Home Office is keeping Fortress Britain safe from ageing punk rockers and French tweens looking to visit the birthplace of Shakespeare. And since both the rockers and the school have said they won’t bother trying again, there is yet further comfort in knowing that these policies are clearly having the desired deterrent effect.
Facetiousness aside, the mobility issues thrown up by Brexit really need fixing. Immigration was a massive factor in the Brexit vote, but that related to illegal immigration and uncontrolled free movement. The semi-amateur rockers or the school kids wouldn’t get any residency rights, and I don’t believe Brexiters were voting to keep them out. Both sides need to sort it out.
What these incidents also point to is the fact that two years after the new rules came into force, Brexit isn’t going away — the trade and mobility frictions that are thrown up by leaving the EU are permanent and corrosive — as the latest trade data is now showing. (More on this below.)
In fact, starting in October and continuing into next year the EU-UK frictions are going to get worse as the UK belatedly introduces its own border checks on goods coming from the EU — something it has postponed multiple times since Brexit in order to avoid supply chain embarrassment and to give it time to put the necessary staff and infrastructure in place.
Whitehall insiders tell me that this time, however, having announced a short consultation with industry, the British government is finally serious about introducing the checks, albeit in a lighter-touch way than originally envisaged.
What this means depends on who you talk to: for farmers and trade negotiators, it’s a welcome levelling of the playing field with the EU whose businesses have been getting a free pass; but for hauliers and traders who rely on EU supply chains and imports, particularly in the agrifood sector, it’s a serious headache. For EU businesses that export to the UK, particularly smaller ones, it’s something they probably haven’t thought much about — but is going to hit them hard from October.
In the topsy-turvy world of Brexit communications, the government spun these new border processes as a “saving” to business of £400mn. This was dutifully reported by The Telegraph as a Brexit win, by comparing it to the £820mn which was originally estimated as the cost of imposing a full-fat border in 2022.
Or, put another way, business will now “only” face £420mn of additional costs from post-Brexit border controls.
What that means in practice, according to Shane Brennan of the Cold Chain Federation lobby group, is that for EU business shipping “medium-risk” goods like meat, fish, dairy and some plant-related products, they will require a physical export health certificate, signed at the point of dispatch by a qualified vet.
That means if you’re an Italian mozzarella maker or a German salami manufacturer who was happily exporting to the UK, from October 31, you’ll need to find and pay a vet and make sure all your paperwork is in order to send those goods to the UK. If you’re a UK supermarket reliant on those EU vendors, you’ll need to make sure that those EU suppliers are au fait with the new rules, or risk supply-chain snafus.
As Shane tells me, that could well make things very interesting for Christmas time if EU companies react the way that many UK companies did in 2020 when the EU imposed these requirements — they simply stopped exporting because they didn’t have the bandwidth to deal with the paperwork. It remains to be seen how many EU exporters take this path.
The government appears to think that it has foreseen this by only introducing documentary and risk-based identity and physical checks from January 31, 2024. But this somewhat misses the fact that the deterrent for business is generating the paperwork needed to load the lorry, not the fear of it being stopped by officials in peaked caps at the border.
This isn’t to say that the UK doesn’t need border checks — arguably it’s pretty outrageous it’s taken this long. And as the IoD said in an excellent recent policy paper on exporting after Brexit, the uncertainty has eroded confidence in the business world that the UK government ever delivers on its promises.
Indeed not so long ago Jacob Rees-Mogg was telling businesses they’d face no paperwork at all — to fury in Defra, the agriculture department, which has wrested back control of the policy from the business department. But all this chopping and changing takes its toll. As the IoD writes after its survey of 580 businesses: “Firms are . . . questioning how dependent they can be on future initiatives.” That needs to change if the Brexit trade and investment environment is to be stabilised.
There are strong arguments for a proper border to avoid biosecurity risks (which we’ve reported on) but also to even things up with the EU. If the UK wants to push Brussels to do more to facilitate trade, then having EU exporters face the same pain as UK exporters could help create pressure from EU industries on their governments to argue for a more pragmatic approach. We’ll see.
That doesn’t mean it won’t come as a shock to those EU businesses that had thought “Brexit was done” and were merrily exporting goods to the UK like nothing had happened to then be told Brexit was only just beginning — nearly three years after the Trade and Cooperation Agreement (TCA) came into force.
HMRC and the government put great stock in the ability of digitisation and the phasing in of its (also delayed) Single Trade Window digital customs solution to reduce the bureaucratic pain, but when I speak to trade consultants they say there is no digital magic wand here. In the end it’s all additional cost and friction that is a drag on UK competitiveness.
The UK will also phase in safety and security declarations from October 2024, albeit with reduced data fields from the current 37 to 24 mandatory fields — another piece of self-imposed pain from Brexit that was a consciously taken choice. The UK could have remained inside the EU security zone, but elected not to.
The food industry is now consulting internally on what the new UK border controls will mean for its members, and which products will fall into the “medium-risk” category. There are quite a lot of grey areas, I am told.
As one insider involved in the consultation with the government tells me, “it’s the sheer complexity of so many different products and where they sit in terms of risk. I think some EU SMEs [small and medium-sized enterprises] will be shut out, others will have to move away from ‘just in time’ groupage models (so more lorries, moving fewer goods).”
Or as Brennan puts it with characteristic pithiness: “This is perhaps the last Brexit-transition sticking plaster that we have to rip off, but don’t believe them when they tell you it’s not going to hurt.”
As a side note, another major headache is looming for agri-food businesses as a result of the Windsor framework which requires goods travelling through the light-touch ‘Green Lane’ to Northern Ireland to be clearly labelled not for consumption in the EU.
The UK government has decided this should be a UK-wide requirement to ensure that the Northern Ireland market is not discriminated against — ie, because companies wouldn’t be bothered to put “NI-only” labels on goods for such a small market, reducing choice in Northern Ireland.
The logical alternative is therefore a UK-wide requirement to label goods “Not for EU”, but that will impose burdens on all companies — both UK manufacturers, including those that might not export to Northern Ireland, and EU exporters to the UK, who will need to label their produce “Not for EU” or “GB-only”.
None of that is attractive from both a cost and marketing perspective. All this is still being worked out, but as with the new border operating model, more bureaucratic Brexit pain is coming down the tracks.
Brexit in numbers
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This week’s chart comes courtesy of my colleague Valentina Romei who reports on the dismal UK trade performance since Brexit.
UK export volumes, excluding precious metals, were more than 9 per cent below the 2019 pre-pandemic average in the last three months of 2022, which puts the UK at the bottom of the G7 pack. And to think Brexit was sold as a tonic for reviving British trade.
It obviously isn’t — how could it be when you erect barriers to trade with your largest trading partner by far? As noted above, much of this is the predictable consequence of Brexit, but if we want to interrogate the choices that actually confront the UK there has to be honesty about where we’re starting from.
As noted in previous editions, Sophie Hale at the Resolution Foundation was among the first to publish on how the ‘dash for gold’ was inflating UK export numbers.
Some Brexiters will want to accuse the Office for National Statistics and economists of trying to cook the books to make a remainer point, but as Hale points out “gold and precious metal exports have little meaningful economic benefit for the UK”. They are just passing through, as it were, with no impact on GDP.
Take these out (see chart) and Hale describes the UK’s performance as “a disaster”. There is, however, some hope when it comes to services — a subject that, barring breaking news, I shall return to next week, with kind help from Britain after Brexit readers.
A quick reminder of next week’s FT Live event: politics professor Jane Green will be joining my colleague Stephen Bush and I for an exclusive webinar for FT subscribers on: Is a Labour victory over the Conservatives inevitable? (April 19, 1-2pm BST — sign up here)
Britain after Brexit is edited by Gordon Smith. Premium subscribers can sign up here to have it delivered straight to their inbox every Thursday afternoon. Or you can take out a Premium subscription here. Read earlier editions on the newsletter here.
Source: Economy - ft.com
