Commenting on the government's Customs Union paper published today, Kimela Shah, Senior Consultant at economics consultancy Oxera, said:
"In a very conservative estimate, we anticipated that the potential cost to the UK of new customs checks—and any ensuing delays—could be over £1bn a year. The proposals outlined today show the UK attempting to keep trade with the EU as frictionless as possible to avoid such costs and likely chaos. The ‘streamlined customs arrangement’ proposes more regulation and administration, but in order to keep these away from the border, it encourages technology-driven solutions. The ‘new customs partnership’ introduces additional costs for businesses to track goods along the supply chain, but will likely minimise the disruption at the physical border. Both approaches would require significant changes to be agreed and implemented. The proposal of a union between the UK and the EU until at least 2022 seems to offer some continuity for businesses until such agreement and implementation, but even a temporary arrangement such as this will clearly hang on the EU's response to the proposals.
"The new customs IT system, also referred to in the paper and due to be delivered just as the UK leaves the EU, remains a cause for concern. The January 2019 target for the replacement of the current customs clearance system was agreed well before the referendum was announced, when it was intended to deliver 60 million clearances per annum. Now it will now need to deliver five times that amount, and there's still no indication of what a long-term customs deal with the EU might look like.
"For now, clarity still eludes businesses that need certainty on the customs rules under which they will be trading."