As the Brexit negotiations continue, the UK public and businesses are made increasingly aware of the complexity of the situation and the task that lies ahead, but it is clear that both the UK and the EU are not on the same page. The EU negotiators want confirmation that the UK will pay what it believes are our financial responsibilities first and foremost, and only then can discussions on trade commence. However, in the blue corner, the UK want assurances on trade arrangements before agreeing to the final bill. Both sides are talking tough, but are clearly nervous and who can blame them. While this battle of wills is going on, the UK and EU industry needs assurance that delivering frictionless trade is a TOP priority for both sides, and to date, this has not been the case.
The questions being asked at this stage are vast: will it be a Hard or Soft Brexit? Are we aiming for single market membership or WTO? How will the trade agreement negotiations pan out? Is everyone vying for the same, frictionless conclusion? The reality is that we all need to trade and we all need to eat – our food supplies must not be disrupted or the unthinkable alternative will automatically lead to delays, add to operating costs, increase inventory levels and severely disrupt both UK and EU manufacturing industries.
The Food Storage and Distribution Federation (FSDF) has been working alongside other associations and business to engage with Government and help shape the future customs arrangements for the UK following its departure from the EU.
The UK needs to trade with Europe, this is a reality. Currently, 28% of the UK food supply originates from EU countries. On top of this, an added 22% comes from the rest of the world, the majority of which travels through Europe on route to our shores. Of the 14,000 trucks a day coming through Dover Calais (Eurotunnel and Ferries), 15% are likely to be refrigerated which equates to 2100 vehicles a day, bringing time sensitive loads of temperature controlled goods into the country, with others transporting in ambient grocery and non-temperature controlled foodstuffs.
Changing the customs arrangements for these vehicles in any way, whilst ensuring a frictionless border, will prove difficult, no matter what solutions the politicians agree to. Around 90%, or 12,600 (1,890 refrigerated) of these vehicles are operated by non-UK businesses which we may or may not want to check, but any mistakes or delays will jeopardise the UK food supply. According to Professor Alan McKinnon from Hamburg University, there are only 6 (or three days) meals in the supply chain, which leaves very little room for error or delay. It will also be expensive, adding to the costs of transportation, which in turn will further add inevitable increases to prices for food items in store.
The Customs Declaration Service, currently in development, needs to be working correctly and right first time “out of the box” in January 2019, ready to deal with a capacity of 300 + million transactions, which is what has been promised by the Government. It must be robust and fully road-tested before launch so there are no glitches, with suppliers, hauliers, agents, importers, receivers, and customers fully trained and fully competent by 2019. This will also provide a training need to ensure that AEO status is learned and earned by the same date. This is a tall order but failure does not bear thinking about.
Arguably, frictionless trade appears not to be an EU objective, although it is for UK. Leaving the customs union will automatically lead to delays, added operating costs and increased inventory levels and costs from stock holding. The food industry, along with those in other industries such as automotive, FMCG and textiles, need assurances that delivering frictionless trade is a top priority in the negotiations, as the added impetus is that it is the same for industry and commerce in EU Members States as well as UK.
The figures that we all need to keep in mind demonstrate the punches we pack in this negotiating battle. The UK exports £230 billion of goods and service to the EU give or take a margin due to the ‘Rotterdam effect’, where the goods pass through the EU on route to a final destination outside the EU. However, we argue that the key spokespeople for the EU negotiators’ countries should look upon the UK as a key customer – when it comes to Germany, the UK imports £25 billion more goods than we export to them; we import £37 billion worth of goods and services more than we export to both the Netherlands and France; and Italy, Belgium and Spain all enjoy a £20 billion trade surplus with the UK. These figures should provide our negotiators with some power, if they can only get the EU to look beyond the Brexit price tag.
Looking at the Government’s history of introducing new digital systems, one can’t help feel a little concerned about the proposed new CDS and the delivery of a system that works and streamlines the declaration process for all parties – both here in the UK and in the EU. When you take into account that a one hour delay at a port or terminal can cost £15,000 to road haulage alone, the prospect of any delays coming into the UK could be catastrophic for our food supply, or at the very least, expensive – and this will be passed down the chain, significantly increasing the cost of any imported food. To help our ports keep moving, we need to ensure that customs and non-tariff barriers are removed to facilitate movement of goods and the Government’s border controls are rationalised to avoid unnecessary costs and delays. The same applies to the land border within Ireland. Again, a hard border between Northern Ireland and the Republic will be dangerously damaging for both sides.
We need a system which works and is trusted by all parties, to prevents the authorities having to make any physical checks on vehicles and containers while in port. And our negotiators need to ensure that our friends in the EU make reciprocal arrangements on borders under their control to prevent delays anywhere on the supply chain. One thing that all parties must keep in mind – failure is not an option.
During the transition period, shippers and forwarders need time to familiarise themselves with any new technologies or systems before the real time launch, to ensure all operators are up to speed and everyone has been trained to use the system effectively. The Government’s proposed transition period must allow for any recruitment to take place, as well as training the trainers and the end users. This is something that needs to be factored into the timescales because, alongside all the other inevitable change and as the stakes are so high, we will only get one shot to get it right.
Another consideration, which should not be overlooked, is the problem caused by so-called clandestines. Whilst the media spotlight has dimmed on Calais following the demolition of “The Jungle”, the problems that drivers experience have not gone away, and have spread to Dunkirque, Ouisterham, and Santander. Indeed, the traffickers are becoming increasingly resourceful in their attempts to smuggle illegal immigrants into the UK. As the new controls are introduced and delays form beyond the 1km walled zone, and if vehicles remain unchecked, the opportunities for clandestine infiltration increase dramatically and the food supply chain is at real risk of contamination. The costs to logistics and transport companies will be crippling and the impact this will have on the food chain will be unfettered.