Queues at Dover will take capacity out of road haulage © PA Images
Queues at Dover will take capacity out of road haulage © PA Images

'Sub-optimal' customs system in no-deal Brexit

22 November 2018

Britain will have a “sub-optimal” customs system in the event of a no-deal Brexit, Jim Harra, deputy chief executive at HM Revenue and Customs, has warned.

During an evidence session before the Treasury select committee yesterday, he told MPs: “What I think would happen, in the event of no deal, is we would start off with a functioning but, clearly, sub-optimal customs border.”

His warning comes amid growing unease among companies who are exposed due to complex supply chains sensitive to any changes in the flow of movement of goods.

A number of firms have publicly stated their plans to stockpile goods over the coming months, with uncertainty over how the ‘just-in-time’ model, on which many supply chains are based, will be affected by Brexit.

Jon Thompson, permanent secretary at HM Revenue and Customs, told the committee that it would take at least two years for Britain to have a fully functioning customs system post-Brexit and that work would not begin on this until there was “certainty” over the details of Britain’s departure from the EU.

He described the prospect of chaos at ports as a “known unknown” and remarked that HMRC could face a huge increase in its workload. “The readiness of HMRC is essentially whether we can gear up to handling the dramatic rise in the number of customs declarations. That goes from our estimate of 55 million a year to 250 million a year.”

Thompson added: “The date for putting in an optimal customs system for the UK in the event of no deal was passed months ago.”

Meanwhile, a growing number of firms are starting to stockpile goods ahead of Brexit. 

Majestic Wine announced today that it is to buy up to an extra £8m of wine in the coming months. 

In the past few days Compass, the world’s biggest catering firm, declared that it is sourcing some new non-EU suppliers and increasing its inventory levels, while engineering company Diploma announced it is stockpiling some of its “faster-moving product lines”.

And last week Premier Foods announced that it will spend £10m boosting stock levels in the coming months. 

Milan Panchmatia, managing partner at procurement outsourcing provider 4C Associates, commented: “In recent weeks we have seen an increase in planning for the stockpiling of dry foods within the grocery sector, as well with organisations such as BT and HP who are considering taking additional warehousing space in the UK to build up stockpiles of key networking equipment.”

However, firms making preparations for Brexit remain "the exception and not the rule,” according to Daniel Peck, principal at procurement consultancy Efficio.

And John Glen, CIPS economist, told SM that Britain has spent decades “building these extremely complex supply chains which are exceptionally lean so that people hold typically very low levels of stock and replenish their supplies on a just-in-time basis”.

Companies seeking to bring their supply chains back to Britain will find onshoring easier said than done, he said.

“Where does that extra capacity come from? It’s just not there. Even if you think about the overland logistics, the trucking of components around the UK, we are massively short of drivers.”

Delays in getting goods through customs could result in food rotting in the trucks, he warned. Lorries caught up in Operation Stack, the reaction to delays at Dover, mean that capacity would be taken out of road haulage, which is an issue “in an industry where we are already short of capacity.”

Glen added: “The biggest concern is the movement of the trucks, keeping goods moving,” and cited recent research by CIPS which revealed that one in 10 supply chain managers said that their firms could go bankrupt if goods were delayed by just 10-30 mins at customs.

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