UK trade volumes have been “suppressed” by the impact of Brexit and Covid-19 and the impact of new customs agreements on businesses is “concerning”, according to MPs.
In a report the Public Accounts Committee (PAC) said “new border arrangements have added costs to business” and new customs regulations are “ultimately harming UK competitiveness”.
The total amount of goods traded between the UK and the EU dropped 25% less in quarter one of 2021 compared to the same period in 2018, the last “normal” year before trade flows were impacted by the pandemic and Brexit preparations, according to ONS figures. The fall was “far greater” than drops in the UK’s trade with the rest of the world, the report found.
Meg Hillier, chair of the PAC, said: “The only detectable impact [of Brexit] so far is increased costs, paperwork and border delays.
“The PAC has repeatedly reported on Brexit preparedness and at every step there have been delays to promised deadlines. It’s time the government was honest about the problems rather than overpromising.
“In our view, there is much more work that government should be doing in the short term to understand and minimise the current burden on those trading with the EU, to address the immediate delivery and readiness risks in introducing import controls, and to have a border in place which is operating effectively without further delays or temporary measures.”
UK businesses have been burdened with additional costs following Brexit due to increased paperwork requirements including rule of origins requirements. Certain sectors including agriculture and animal produce face additional costs from July when new rules will require them to pay for physical inspections of goods.
While the report said “there is clearer evidence available of the impact of the UK’s new trading arrangements on UK businesses”, it was “hard to disentangle the effects” of the Covid-19 pandemic and the end of the transition period on trade.
The report also warned that new customs regulations were having a particular impact on small businesses because they needed to hire intermediaries to process additional paperwork.
In 2019, HMRC estimated new customs rules could cost UK and EU businesses £15bn per year.
Sarah Laouadi, head of European policy at Logistics UK, said the government needed to give “urgent focus” to the UK’s border arrangements to prevent trade “grinding to a halt” this summer.
Laouadi said: “Our industry has made huge strides in preparing for new border and customs arrangements with the EU since the Withdrawal Agreement was signed, but the imposition of new import checks this summer and introduction of new border processes could have a significant impact on the ability of UK businesses to trade effectively in the future.”
She pointed to research which found that a two-minute delay at the border could create up to 29 miles of traffic, and warned “while some friction is unavoidable after the UK’s departure from the EU, the potential time that the new system would take could be disastrous for the UK’s highly interconnected supply chains”.
“Businesses moving goods from the EU to the UK have been working hard to prepare for the new EU import requirements, but there is still much to be clarified by government,” she said.
Shipping data company Project44 said the amount of time containers spent berthed at the Port of Felixstowe reached a European high in January of 6.3 days, up on 5.1 in December.
Josh Brazil, SVP global supply chain insights at Project44, said: “Brexit has caused unrelenting delays coming in and out of UK ports. This, coupled with the crippling effects of Covid, has put Britain at the eye of the storm for supply chain disruption. Lockdown uncertainty compounded the whirlwind of more stringent Brexit border legislation, meanwhile demand for goods has remained high.
“There is clearly no let up for supply chains in 2022, as Brexit and Covid continue to trouble global supply chains.”