Richard North, 14/07/2020  

After a while in the doldrums, Brexit news is picking up momentum, doubtless fuelled by a growing realisation that all is not well with the world.

From a raft of reports, we see one in the Guardian telling us that "three in four UK firms" are unprepared for Brexit.

This is based on an IoD survey that says half of companies they questioned could not fully plan for the end of the transition period due to the lack of clarity on the rules. Manufacturing firms, in particular, are unlikely to be ready.

Interestingly, the lack of clarity on rule changes is seen as a bigger impediment to Brexit preparation than the need to focus on the coronavirus pandemic. Almost half of 1,000 company directors polled said they were unable to prepare now for the changes needed from 31 December, with almost one in three saying they could only make adjustments once the details were clear.

We are also told that a clear majority, 69 percent of directors, said that securing a trade deal, rather than crashing out of Europe on WTO terms, was important for their own company. Even among directors who saw positives in divergence from EU rules, seven in ten said a deal would be important to the economy.

What we're getting here, though, is garbage. Those who are being asked to compare their company's fate, as between a no-deal (WTO terms) and a trade deal, are being presented with a false comparison. At this stage, the best we have on offer is a de minimis deal, which isn't going to be so different from a no-deal.

The second false premise they are being asked to entertain is the assumption that it is possible to prepare for many of the issues that will arrive once we leave the Single Market. Many aspects are entirely out of our hands, and will rest on actions taken by the authorities in EU Member States.

In other words, businesses seem to be residing in a "fantasy Brexit" world where all they have to do is wait for the details of the TransEnd settlement to be declared, whence the necessary adjustments can be made. This rather neglects the point that, when we move outside the Single Market, there will be many barriers to trade which will be almost impossible to overcome.

Fairly obviously, one of those areas where adjustments may be fraught is in dealing with the costs of new border measures. The Financial Times is reporting that businesses will have to absorb £7 billion annually, just to pay for the extra 215 million customs declarations.

The Times, however, puts the total cost at £13 billion, if you include the costs borne by EU-based companies – and that only covers customs declarations.

With that sort of money involved, businesses will need to recover their costs but, in price-sensitive sectors, that may not be so easy. Some will go under, while others might have to give up trading with EU Member States, taking a hit on turnover, rather than incurring losses.

However, we haven't seen any estimates for inspection fees in Border Control Posts. They are likely to be substantial, and will have a particular impact on companies trading in food, and especially animal products. Fees for affected companies could exceed the costs of processing customs declarations.

Something else that hasn't been done either is to estimate the costs of delays, but in terms of reduced driver productivity and vehicle utilisation, there must be a significant figure involved. And then there are bound to be other costs crawling out of the woodwork.

The thing is, as is readily acknowledged, all these costs will be incurred, regardless of whether Britain and the EU conclude a trade deal this year. If that trade deal is set to include mutual agreements on conformity assessment – over a wide range of products – then there will be some savings. But if we can't even agree on these issues, then costs are bound to spiral.

Yet, prime minister Johnson seems to be arguing that the Covid-19 crisis has put the costs associated with Brexit "very much into perspective". By this, one infers that he is saying that, because Covid has cost us a shed-load of cash, the Brexit costs aren't quite so important. Somehow, he doesn't seem to understand that some firms damaged by the pandemic measures will be less able cope with Brexit burdens.

Then, in spite of everything, it is looking increasingly uncertain that new IT, customs experts and lorry parks will be ready by the end of the year. And if they are taking this seriously, neither Johnson nor Mr Gove are showing any signs of it. Johnson is insisting that what he calls the "Project Fear" warnings of anti-Brexit campaigners will turn out to be ill-founded.

He thinks that there are "big opportunities for this country to do things differently and do things better". I suppose opportunities for bankruptcy could come in this category, although I'm not sure of how one does it better. Perhaps we need guidance on world-beating bankruptcy methods.

Nevertheless, one gets a little bit tired of this hype on Project Fear. We on this blog are by no means "anti-Brexit" yet we too are warning of substantial adverse effects from leaving the Single Market. Are we to be regarded as "Project Fear" as well? And if so, at what point does fear become reality?

For instance, Gove has not disputed industry estimates that some 50,000 new private sector customs agents will have to be hired by business to deal with formalities at the UK-EU border - regardless of whether the two sides reach a trade deal. It seems that businesses are not allowed to be worried about potentially crippling cash flow problems, even though they are known to exist.

And for Northern Ireland traders, we seem to have another layer of uncertainty as the Brexiteers nibble round the edges of the Withdrawal Agreement. For those who thought it was a done deal hadn't reckoned on the bad faith of these Muppets, even though Brussels has once again ruled out re-opening this treaty.

The main event, for the moment, though, is the burgeoning cost of Brexit, and it is interesting to see John Crace pitch in with his own critique of Gove's performance.

Having the Chancellor of the Duchy of Lancaster make a statement, outlining the government's exciting £705 million "let's get going" advertising campaign, he sees as Gove telling the Commons that "everything we now get for free and with no hassle" is "about to get a whole lot more expensive and time-consuming".

Crace too notes how difficult it is to pin Gove down on anything. "Then there are few cabinet ministers more adept at reframing acts of deliberate self-harm as public service announcements", he writes.

But then, it looks as if Gove will have a lot of announcements to make, so he will need to pace himself. Apparently, he is to open 10-12 Brexit border customs sites, so that will be keeping him busy for a while, as he writes the next chapter of our glorious history as "a fully independent United Kingdom".

So far, that chapter has just had added to it a 206-page document detailing the new border controls, but it leaves Richard Burnett, head of the Road Haulage Association, distinctly unimpressed.

He is warning of a serious shortage of customs agents and has expressed concern about a proposed new "Smart Freight" app, that lorry drivers will have to complete in advance before travelling to ports in Kent.

Hauliers have been promised it will be ready by the end of the year, but Burnett said: "That's not that much use to say it's ready by the end of the year. We need to be able to touch, feel and train people on the functionality for it to be working from 1 January".

What Burnett needs to get to grips with is that, while we might have "smart freight", we have dim politicians. And, for those, there is no known cure.

Also published on Turbulent Times.

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