Last reviewed 4 March 2022
It always seemed a little strange that the Prime Minister should choose the Foreign Secretary as the replacement when Lord Frost resigned from his post in charge of negotiations with the European Union over the application of the UK-EU Trade and Cooperation Agreement (TCA) given the complexity of the long-running problems with the Northern Ireland Protocol.
It was always likely that Foreign Secretary Liz Truss would have too many other items in her in-tray to properly devote attention to solving this conundrum. And then, of course, Russia invaded Ukraine and it can be assumed that her focus is now fully on the situation in Eastern Europe.
There was one meeting in February between the Foreign Secretary and European Commission Vice-President Maroš Šefčovič after which she issued a short statement confirming that they had “agreed on the need for progress in their talks in the interest of people in Northern Ireland” and would stay in close touch. Mr Šefčovič was slightly more forthcoming as he highlighted concerns that previous promises to guarantee the rights of EU citizens resident in the UK needed addressing.
Otherwise, he underlined that the UK and EU continued to share an overriding commitment to protect the Good Friday Agreement of 10 April 1998 “in all its dimensions” and that they would work to ensure that the outstanding issues are addressed. Nothing further has been heard from either side despite the fact that Northern Ireland’s Democratic Unionist Party (DUP) has warned that it will not return to the power-sharing Executive unless issues related to Brexit are resolved.
Court acts on border checks
Attempts by the DUP to stop checks on goods arriving from Great Britain, which we reported last month, reached the High Court where Mr Justice Colton confirmed that these inspections must continue until a judicial review against the DUP’s decision can be heard in full. He pointed out that the checks had been ongoing for more than a year and that the order to halt them had been brought at short notice. The judge said: “There shouldn’t be any confusion hanging over those in the Civil Service, so I am persuaded this is a case where there should be interim relief.” It is understood that the case could be heard during March and, in the meantime, Downing Street has confirmed that checks are continuing.
Rees-Mogg backs Brexit
The former Leader of the House of Commons, Jacob Rees-Mogg, was appointed Minister for Brexit Opportunities and Government Efficiency in February. One of his first actions was to ask readers of The Sun to tell him “of ANY petty old EU regulation that should be abolished”. It is not known how many responded. Mr Rees-Mogg then came under criticism for insisting that evidence of trade having been damaged by Britain’s exit from the EU was “few and far between”. Several trade groups pointed out that he had made the comment the day after the Office for National Statistics (ONS) issued figures showing that UK exports to EU countries had shrunk by a record £20 billion in just 20 months. Sales to the EU dropped more sharply in 2021 than exports to any other country in the world, according to the official data.
MPs beg to differ
Mr Rees-Mogg will have found the latest report from Parliament’s influential Public Accounts Committee (PAC) difficult reading as it argues that Brexit has meant a clear increase in costs, paperwork and border delays for UK businesses. The report concedes that, since the end of the transition period on 31 December 2020, UK trade volumes have been suppressed by the impact of Covid-19 and wider global pressures, but goes on to state that “it is clear that EU exit has had an impact, and that new border arrangements have added costs to business”. Available here, EU Exit: UK Border post transition notes that the Government has ambitious plans to create “the most effective border in the world” by 2025, which includes plans to make it easier and simpler for traders to submit information on goods crossing the border. “While this is a noteworthy ambition,” the Committee agrees, “it is optimistic, given where things stand today and we are not convinced that it is underpinned by a detailed plan for delivery.”
Pouring more cold water on the Government’s optimism, if cross-border passenger volumes that have been at a fraction of normal levels because of Covid-19, recover as may be expected during 2022, the report argues there is potential for further disruption at the border. This would be exacerbated by more checks at ports as part of the EU’s new Entry and Exit system (EES) and especially at ports such as Dover where EU officials carry out border checks on the UK side.
Hauliers join the chorus
Responding to the PAC report, leading trade body Logistics UK also warned that the Government needs to place an urgent focus on arrangements at the nation’s borders if trade and passenger traffic is not to grind to a halt from this summer onwards. While the logistics sector has made huge strides in preparation for new border arrangements, the organisation’s head of European policy, Sarah Laouadi, noted, there is still much to do to keep the UK trading with its closest business market. “The new EES passport checking system needs urgent attention, as it currently would require drivers to leave their vehicles and cross live traffic lanes in ports and terminals to undergo passport checks,” she pointed out.
According to the European Commission, the EES is an automated IT system for registering travellers from third-countries (of which the UK is one), both short-stay visa holders and visa exempt travellers, each time they cross an EU external border. Not only would this create safety risks, Ms Laouadi argued, but it will have a severe impact on the time it takes to cross the border with knock-on effects on traffic flows on both sides of the Channel. She concluded with a reminder that a two-minute delay at the border can create up to 29 miles of queuing traffic.
Trade experts confirm the bad news
With Mr Rees-Mogg often seeming to be alone in his optimistic calculations regarding the impact of Brexit, the last thing the Government needed was for an independent group of trade experts to offer more evidence for the negative side of the ledger. The UK Trade Policy observatory (UKTPO), a partnership between the University of Sussex and Chatham House, examined trade data for 2021 to check on the impact on bilateral trade between the UK and the EU of the first year of the TCA.
On the plus side, it noted that, while UK exports to the EU saw “a jaw-dropping fall” in January 2021 (down 41%), they quickly recovered in subsequent months, resulting in a moderate fall of -3% for the whole of 2021. However, the same cannot be said for the effect of the TCA on UK imports from the EU as they fell by 32% over the year. “Generally, it has become more difficult and costly to trade with the EU as firms now face bureaucratic costs that were otherwise not present,” the UKTPO concluded.
Majority of trading firms still unhappy
A study of more than 1000 businesses has highlighted what the British Chambers of Commerce (BCC) has described as a host of issues with the UK’s trade deal with Europe. Overall, just 8% of firms agreed that the TCA was “enabling their business to grow or increase sales”, while 54% disagreed. When asked to comment on the specific advantage (for those that agreed) or disadvantage (for those that disagreed) of the trade deal, 59 firms identified an advantage, while 320 cited a disadvantage.
Customs costs go to record high
According to accountancy firm UHY Hacker Young, which has conducted research in the area, customs duties paid by UK businesses rose by 64% to a record £4.5 billion in the year to 31 January 2022, up from £2.9 billion in the previous 12 months. The figures show that the last five months to 31 January 2022 were the five highest individual months on record for customs duties paid, with over £2.1 billion collected in that period alone.
Speaking for the company, Senior Manager Michelle Dale said: “This shows how the post-Brexit increase in custom costs to UK consumers is really biting. The cost of tariffs and extra paperwork is causing serious difficulties for many businesses, who are already struggling to stay profitable in the face of mounting pandemic-induced costs.” Custom duties have taken a big bite out of firms’ profitability, she went on, and those importing and exporting goods between the UK and EU might be questioning whether their business models are viable.
Coincidentally, HM Revenue & Customs (HMRC) has issued a call for evidence on how it can improve the UK’s customs system by simplifying processes for traders and embracing innovation. If you want to add your ideas, you have until 2 May to comment at https://www.gov.uk/government/consultations/call-for-evidence-an-independent-customs-regime