Brexit Customs Clearance Agents:
The impact of Brexit on trade and industry within Ireland and the UK
Brexit hangs in the balance and as such, so does the political and economic future of the UK and Ireland. With huge significance for all four corners of the UK and Ireland not least the north of Ireland where it’s effects will be keenly felt by business and private individuals alike, politically and economically, Brexit is a gamechanger the like of which hasn’t been seen in over 60 years.
Asides from customs tariffs, businesses in the north of Ireland are most concerned with the possibility of a hard border which could lead to long queues and delays and change dramatically the invisible border conditions which currently exist according to Johnny Hanna head of tax at KPMG. Such a change in border conditions would be catastrophic to the fortunes of many sectors within the island of Ireland and the UK as a whole.
Impact On Just In Time Supply Chain in agrifood industry.
Pointing to an OECD trade cost estimate report which conservatively states that inefficiencies and delays around the border could add up to 10% on the trade value of goods shipped, the impact of Brexit and particularly a no deal Brexit does not bode well. With tight margins already seen in Northern Ireland’s production costs, any increase as a result of Brexit will be a huge concern to businesses which are only starting to rise out of the 2008 recession. Delays to goods due to Brexit will particularly impact the agrifood industry. The UK imports around 40% of it’s fresh produce from Europe. With the largest number of supermarkets in Europe, UK margins are tight and are highly dependent upon a just in time supply chain. This means that any shake up in importation causing delays at borders would be highly undesirable and would have a dramatic and negative impact on supply chains and profits not least in terms of spoiled goods.
The market value of grocery retail within the UK is worth £185.2 billion and growing . This massive sector is very vulnerable to external forces and in particular logistics. To illustrate, the fruit and veg market was adversely affected in 2015 when French farmers in Calais decided to strike. Queues of up to 30 km were seen in and around uk ports not to mention massive queues at the port of Calais. This created massive spoilage of fresh food such as strawberries and other perishable goods. Typically, soft fruit like strawberries from the continent are picked and transported within a 24-hour period and reach the UK within 48 hours leaving a shelf life of around 3 days.
In terms of produce leaving the UK the same scenario exists in terms of farm to fork time line.
- In 2016 the UK exported 43% of its good and services to Europe, worth approximately £241bn.
- The UK imports 13.8% of its goods and services from the Republic of Ireland
- The Republic of Ireland is the UK’s 5th biggest importer.
- The Irish Republic imports 37% of its goods from the UK.
- According to KPMG about 56% of Northern Ireland’s goods and service exports go to EU and 2/3 of that is exported south of the border.
Brexit will undeniably have a huge adverse effect on the Northern Ireland economy
Key dates for Brexit
October 18th 2018, is a crunch date for BREXIT and UK Prime Minister Theresa May as it marks the EU Summit where both sides hope to agree the outline of future relations between the UK and EU. Having finally agreed a plan with her cabinet on 7th July, which has already been largely dismissed by chief Brexit negotiator Michel Barnier, negotiations do not augur well. Barnier has already stated that the EU would never accept the UK as a non-EU member collecting customs duties on its behalf. Moreover, complications would also arise as a result of the origin of goods coming from NI and GB businesses. Without a deal Brexit would be a cliff edge exit with the UK reverting to WTO tariffs which could be as high as 60%.
Cheap exports, costly imports
Whilst the currency rates are at present favouring the UK and Northern Ireland’s exports and are boosting the economy. Import costs have been rising steadily and have been driving inflation and this will continue to adversely affect imports from the EU and fuel price rises.
Labour Movement and Agriculture
There are also great fears for the agrifood business and hospitality industry which depend greatly on migrants for labour. Tighter controls on immigration have already encouraged many migrants to move back to Europe and farmers and hoteliers are understandably nervous about having a steady supply of competitive labour to service their business. 60% of farm incomes come from subsidies, so understandably farming is one sector which maybe adversely affected. Theresa May has indicated that the government will honour farm subsidies until March 2020, but beyond that nothing has been agreed. MPs on the environmental audit committee have warned that an exit from the CAP will threaten the viability of some farm businesses. Moreover, taxes imposed on agricultural exports will threaten farm viability. Opening trade agreements with other countries outside the EU may flood the UK with cheap imports of questionable levels of quality as well as animal welfare and environmental standards.
The Impact of the Common Travel Area
For Northern Ireland in particular, the continuation of the common travel area is crucial to retain the status of workers who cross the Northern Ireland border every day for work, but also for education and medical care. Theresa May’s Chequers Brexit plan has already stated that free movement will end and the UK will take back control of its borders with citizens having to apply to travel to each other’s territories to study and work. How this will work in practice across the Irish border remains to be seen, but those who live right along the border and travel its invisible border in the course of their day for many purposes, not least doing their shopping, will be understandably very nervous and angry at this proposal. With approximately 275 border crossings from the North of Ireland to the south, the UK and Europe will have its work cut out trying to ensure customs and excise duties are applied and to control free movement of people.
Political and Economic impact of Brexit on Ireland
With the North of Ireland still experiencing a fragile peace and lack of Stormont Executive government, it’s imperative that Brexit doesn’t negatively impact the north’s economy as this will feed into the political and economic vacuum which already exists and could reinvigorate the sectarian hatred and violence which is already close to the surface. Above all else, the North of Ireland needs stability, guaranteed long term investment and an invisible border in order to safeguard its future employment, growth and political and economic stability. Withdrawing from free movement of people will have a very negative impact both on the free movement of labour back and forth across the Irish border and also throughout Europe and the rest of the UK. One viable solution mooted by Sinn Fein would be to put the border in the Irish sea, where it would be practical to have custom checks in the UK before goods and people enter the island of Ireland. However, May’s weak majority backed up by unionist DUP MP’s will not countenance such a solution.
While the European Commission, France and Germany press for a clear cut statement on what the post Brexit trading relationship with the European union should look like, May is in a weakened position and is fast losing ground in her EU negotiations. Her charm offensive this summer across Europe to garner support for her Chequer’s agreement is evidence of her desperate attempt to hold ground but as yet is showing little chance of success.
Proposed deal with the EU
Bank of England Mark Carney has rated the possibility of a Brexit no-deal as “uncomfortably high”. He has said it “will disrupt economic activity for a period of time, slowing the economy”. How long its effects will last remain to be seen. Indeed, it is clear from many economists that crashing out of the EU without any deal could cause an economic slow-down which could take 50 years to climb out of.
October is a make or break month with regard to Brexit. What is most damaging to the current economic climate is the continued uncertainty and lack of clarity from the British government about the relationship that they wish to have with the EU and the apparent lack of understanding of how critical ensuring a soft border in the north of Ireland will be to achieving a more positive outcome for the UK as a whole.
- 29 March 2018 – British Exit date from EU
- 29 March 2019-31st December 2021 – Transition period
- 18 October 2018: The key EU summit. Both sides hope to agree outline of future relations to allow time for UK parliament and EU members to ratify deal by Brexit Day
- 13 December 2018: EU summit. October requires a deal to be done or the option will be the, fall-back position with the backstop, if the two sides still wish to reach some form agreement
- Vote on withdrawal treaty in the Commons and Lords – MPs could reject the deal but there is no clarity as to what course of action would result should this be the case.
- Implementation bill needs to be passed by the UK Parliament before Brexit Day
- 29 March 2019: Britain due to leave 11pm UK time as things stand
- 31 December 2020: Transition period will last until midnight December 31st 2020.