Outside the EU single market ‘eco system’ we will always have trade barriers and, more importantly, we will all know that we have trade barriers because that is what Brexit built in 2021 when the TCA took effect. I can’t imagine a time when those barriers are not a loudly-voiced source of trade friction. Brexit will always be the elephant in the room.
British exporters aren’t likely to forget the problems and pro-EU politicians won’t stop pointing to the barriers whenever the UK government talks about trying to encourage growth. An SPS agreement on food safety will only show what can be achieved and will further lock us into EU rules over which we have no say.
To see this constant 'pull' towards European integration, note that the new government in Iceland has pledged a referendum on EU membership by 2027. The island is in the single market and the Schengen area but will soon decide if it wants to play a bigger part. Norway too is moving slowly in that direction, sparked by the chaotic events in Washington under Trump after twice rejecting EU membership in the referendums of 1972 and 1994. If Iceland and Norway join, along with Ukraine and the other accession countries, the UK will stick out like a sore thumb, looking enviously at the lack of self-imposed barriers in Europe.
But going back to the fall in trade, I see the government has published statistics for the number of customs declarations for international trade in goods cleared by HMRC in 2024. There were 84.6 million declarations submitted and cleared by a total of 5,650 declarants. Of this total 39.2 million were connected to our trade with the EU, about half from 4,010 declarants.
Now, you might recall in 2018, Jon Thompson the Permanent Secretary at HMRC, wrote to Nicky Morgan, chair of the Treasury Select Committee about proposed "Highly Streamlined Customs Arrangement facilitations" with some estimates of the volumes and costs involved.
At that time, seven years ago, HMRC estimated there would be 205 million "intra-EU" customs declarations, that would need to be submitted by the 145,000 UK firms trading "only with the EU."
This was "HMRC’s assessment of the number of future customs declarations for UK businesses for each group and multiplies this by a representative weighted average cost per declaration for each group based on current of patterns trade."
You can see there is a huge disparity between the two sets of numbers. You might ask how they came to be so wrong. Their figures were "based on current [2018] Intrastat declarations (EU trade data), VAT data and current customs declarations. The estimates used for the cost of customs declarations were a synthesis of a number of sources, including a range of surveys and HMRC’s admin burden toolkit."
I don't believe HMRC statisticians could have been so far out (+400% on declarations and + 3,500% on the number of declarants trading with the EU). They could have over-egged it a bit but the error is orders of magnitude wrong.
The latest statistics are obviously correct. I assume the difference is due to a combination of things. It may have simply been an overestimate by HMRC staff and I certainly don't rule that out. Phillip Hammond was the then-chancellor of the exchequer but Liz Truss as chief secretary was the person Thompson reported to and I assume they were involved in compiling the figures.
I think it mainly reflects three things. Firstly, we know many companies have set up distribution systems in the EU and now transport bulk, consolidated loads to warehouses inside the single market, reducing the need for individual customs forms for each item. This created jobs for Europeans and cut the number of workers needed in Britain as well as the amount of form filling. Sports Direct was one early example, I remember. It was an obvious solution that HMRC didn't consider.
Secondly, a lot of small and medium-sized businesses that used to export to the EU have given up completely after becoming uncompetitive overnight and unable to face the frustrations of form filling. There are reports that this was about 33% in 2022 and it may be even higher now.
Thirdly, many of those that stuck at it, especially smaller businesses, use customs agents now so the number of declarants would be expected to reduce anyway. One agent will represent dozens and dozens of exporters, but at a cost.
Back in 2018, HMRC estimated the cost of self-completing a declaration was between £15 and £55 for different types of business. Inflation since then has been around 28% which means even the reduced number of declarations will be costing firms somewhere between £755 million and £2,770 million every year - quite apart from the loss of trade.
Only freight forwarding/customs agency businesses have reason to be thankful for Brexit.
