Wednesday, February 27, 2019

UK Government Report States How Few Importers Have Prepared for No Deal Brexit

Only One Sixth of Firms That Need EORI Have Signed Up So Far
Shipping News Feature
UK – EUROPE – With just over a month to go before Britain exits the European Union the government has published a report 'Implications for Business and Trade of a No Deal Exit' which makes much of the fact that, despite dire warnings that importers should prepare for this scenario, only around one sixth of companies which should have registered for an Economic Operator Registration and Identification (EORI) registration number, have actually done so.

Estimates of the number of companies which will need to register in order to make customs declarations post-Brexit stand at around 240,000 and the report goes on to say that the UK Government has still not published its intended tariffs for imports into the UK post-Brexit.

There is a government sponsored website ‘Prepare for EU Exit’ which aims to support those who feel they should make arrangements but it seems many companies will simply be turning to the legion of freight forwarding agents who have been preparing for all eventualities. Global audit and tax consultancy firm RSM International commented on the report, with Brad Ashton, Customs and International Trade partner, saying:

”While the Government highlights that there is capacity to sign up 11,000 businesses per day for an EORI number, this is less than reassuring. Clearly, there are a huge number of businesses who simply aren't aware of what they need to do to be able to continue to trade with the EU post-Brexit.

”For some businesses that are already VAT registered the process for obtaining an EORI can be straightforward. However, for non-VAT registered businesses the process is more complex and time consuming. The message is very clear, those businesses that trade with the EU and haven't yet obtained an EORI need to get their skates on as the clock is ticking.”

The report also takes a subtle swipe at the attitude of the EU toward the negotiations, quoting a speech to Parliament by the Secretary of State for Trade in January saying ‘We all know from experience that the politics of the EU can take precedence over economic pragmatism. In the political atmosphere of no deal, it would be difficult to cultivate the good will necessary for that to proceed’.

This refers in the report to the mistaken assumption by some parties that a no deal would simply mean the introduction of Article XXIV of the General Agreement on Tariffs and Trade (GATT), resulting in tariff free trade for the next decade. As the report indicates this cannot take the form of a unilateral declaration.

It is not only companies which the report says are unprepared for the situation, individuals will require things like car insurance green cards (remember them) and International Driving Permits to drive in the EU. The better news is that the three unilateral contingency measures the EU has announced if no deal transpires do mitigate some of the most acute immediate impacts, for example on aviation, road haulage, financial services and potentially citizens’ rights.

These measures are themselves only temporary and the report concludes that the short term effect will be to hit the UK economy which would shrink 6.3-9% in the long term in a no deal scenario (after around 15 years) than it otherwise would have when compared with today’s arrangements, assuming no action is taken. This effect would also be felt in many EU countries as well.

Despite positive notes as to the French attitude to border crossings, the prediction is for food prices to rise, particularly on those items which Britain traditionally imports from some of the warmer European countries. With 70% tariffs on beef exports and 40-45% on lamb, farmers are praying for a negotiated deal, whilst automotive interests will view a 10% tariff with horror. Almost 43% of the cars made in Britain currently find their way into the 27 EU countries.

The report puts much stock in the transitional simplified procedures for EU trade at roll-on roll-off ports, which are intended to make it easier for traders importing from the EU to comply with customs requirements immediately after EU Exit. However there are dire predictions for Northern Ireland, with an economy largely based on agriculture, the effect of tariffs could potentially be very damaging according to the report.

There are other low points, the service sector will be upset if free movement in each direction is hampered and professionals in various sectors may find their qualifications irrelevant in the shrunken EU. The closing paragraph of the report says it all:

”However, the short time remaining before 29 March 2019 does not allow Government to unilaterally mitigate the effects of no deal. Even where it can take unilateral action, the lack of preparation by businesses and individuals is likely to add to the disruption experienced in a no deal scenario.”