NAO warns of ‘significant’ post-Brexit trading disruption

UK traders face ‘significant’ disruption at the border from 1 January next year, despite the government spending £1.4bn this year on preparations, because of the tight timetable, the impact of the pandemic and a lack of contingency planning, the National Audit Office (NAO) has warned

In its fourth report assessing the government’s systems, resources and infrastructure preparations for Brexit, the audit watchdog said Covid-19 has exacerbated delays in getting ready and significant risks remain, particularly in relation to implementing the Northern Ireland Protocol and trader readiness more generally.

The ability for traders to move goods under transit arrangements is a key element of the government’s plans but the NAO says some elements will be challenging to deliver in their entirety.

Current HMRC estimates indicate that there will be around 6.3m movements of goods under transit arrangements in the year following the end of the transition period. If all the planned arrangements are not ready, this could have an impact on the ease with which traders can import and export goods.

There is little time for ports and other third parties to integrate their systems and processes with new or changed government systems, and contingency plans may need to be invoked for some elements.

In part as a result of the delays caused by the pandemic, there is limited time to test individual elements and resolve any emerging issues; ensure elements operate together; familiarise users with them in advance and little or no contingency time in the event of any delays.

The NAO warns that even if government makes further progress with its preparations, there is still likely to be significant disruption at the border from 1 January 2021 as traders will be unprepared for new EU border controls which will require additional administration and checks.

The government’s latest reasonable worst-case planning assumptions, from September 2020, are that 40% to 70% per cent of hauliers will not be ready for these new controls and up to 7,000 lorries may need to queue at the approach to the short Channel crossings, such as Dover to Calais.

To address this, the government intends to launch a new web service called ‘Check an HGV is ready to cross the border’ for hauliers to check and self-declare that they have the correct documentation for EU import controls before travelling and obtain permits to drive on prescribed roads in Kent.

However, there is more to do on how ‘Check an HGV’ will be enforced and how it will work together with traffic management plans for Kent.

Government is preparing civil contingency plans, for example to ensure continuity of the supply of critical goods and medicines in the event of disruption to supply chains.

The Department for Transport has awarded contracts to provide additional freight capacity for over 3,000 lorries a week on routes avoiding the short Channel crossings, but the NAO said Covid-19 is making civil contingency plans more difficult to enact, with local authorities, industry and supply chains already under additional strain.

Northern Ireland

The government will also need to implement the Northern Ireland Protocol from 1 January 2021. However, due to the scale and complexity of the changes, the lack of time and the impact of ongoing negotiations, the NAO ‘s assessment is that there is a ‘very high’ risk it may not be implemented in time. 

The government has left itself little time to mobilise its new trader support service (TSS), costing £200m, to reduce the burden on traders moving goods to Northern Ireland and to help them prepare, according to the NAO.

Work still needs to be done to identify NI traders and sign them up to use the service; recruit and train the staff required; develop software to enable traders to connect to HMRC’s systems; and deliver educational activities to traders.

 There is also ongoing uncertainty about the requirements for the movement of goods under the protocol, and as a result the NAO said there is still a high risk that traders will not be ready.

The NAO said the government is spending significant sums of money preparing the border for the end of the transition period and, in 2020 alone, announced funding of £1.41bn for new infrastructure and systems, and wider support and investment. 

Despite this, there remains significant uncertainty about whether preparations will be complete in time, and the impact if they are not. The watchdog says some of this uncertainty could have been avoided, and better preparations made, had the government addressed sooner issues such as the need for an increase in the number of customs agents to support traders.

Gareth Davies, NAO head, said: ‘The 1 January deadline is unlike any previous EU Exit deadline – significant changes at the border will take place and government must be ready.

‘Disruption is likely and government will need to respond quickly to minimise the impact, a situation made all the more challenging by the Covid-19 pandemic.’

Further reading:

The UK border: preparedness for the end of the transition period

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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