EU Referendum

Brexit: back to darkness


With quite extraordinary sloth, the media is gradually waking up to the disaster that is about overtake Brexit, although – as yet – there is no recognition of the scale of what confronts us. 

The glimmer of consciousness appears in The Sunday Times which tells us that "Brexit customs checks could land UK with 24% price rise", an issue that could arise "even with free trade deal".

And it is this which is the virus which bring the system down. Regardless of the outcome of the Brexit talks, customs procedures will apply to UK exports to the EU. There is no could about it – customs procedures will apply.

The essence of what The Sunday Times is then reporting – based on a "leaked government document" – is that the exports will be subjected to "burdensome procedures" at EU ports.

This (albeit limited) intelligence comes in a briefing from Alex Pienaar, head of EU exit policy for HMRC. He says that, "any form of customs controls will increase the costs to businesses and consumers of imported and exported products", adding that these costs "can be both financial and measured in time/delays".

What we have here is the first official acknowledgement of problems to come. And, in a separate piece, we also see recognition that: "the situation would be particularly onerous for those exporting food and other agricultural products into the EU with delays of up to a week for meat tested at official laboratories".

This, though, is only the half of it. Known to The Times but as yet unreported is the drastic lack of capacity in the EU's Border Inspection Post system. We need to stop messing here. This means that UK food exports, involving any fresh meat, products of animal origin (including cheese and other dairy products) or vegetable product, will effectively cease from Brexit day onweards.

Throughout the country, the broader effects will be variable. Perversely, the sector least affected will be finished motor vehicles exported to the continent. Large car transporters can carry several thousand vehicles, which can be treated as one consignment (or a limited number of consignments) for customs purposes.

Furthermore, things like bulk chemicals and bulk grain exports will be fairly easy to process – although the REACH problem is something else that must be addressed, before chemicals can be exported to EU Member States. Otherwise, these products will not be released for free circulation. They will be barred from entry.

The real problem is the ro-ro traffic, the 16,000 or so truck per day which rely on roll-on, roll-off ferries, departing mainly from Dover and via the Channel tunnel, but also from ports such as Plymouth, Tilbury (the London Container Port), Felixstowe, Hull and Immingham.

At the very least, each truck becomes a consignment in its own right, requiring customs clearance . But, substantially aggravating this problem is "groupage" – mixed loads which account for anything up to 30 percent of the traffic, averaging out at 20 consignments per load.

The enormity of this has not even begun to register as that adds to the customs burden more than 100,000 consignments (rather than loads) daily. The paperwork alone will be crippling.

For the UK, the problem is that customs controls will go far beyond straightforward documentation checks. They must do. The UK assumes third country status and the EU must treat us the same as they do any other third country. To do otherwise would have the EU not only in breach of those famous WTO rules, but also in breach of its own.

The same, of course, applies the other way round. The UK can (and will have to) apply its own customs code but, under WTO rules, it cannot treat goods from the EU any differently than those from any other of its trading partners. Nor, practically, could it do so. We depend absolutely on imports for our physical survival – unlike the EU.

Speaking of customs codes, the last time the UK had complete independence in framing its own customs controls was 1972. Since then, progressively, and with increasing force, the UK has handed over the formulation of its customs controls to the European Union.

Over those many years, the world around us has changed so that, what once was would no longer be enough. Simply going back to 1972 and picking up the threads is not an option. We will need a brand new code and anyone who thinks this task can be completed and road-tested inside two years is deluding themselves.

Back to the main event, come Brexit day plus one, EU customs controls will apply to UK goods exported to EU Member States. The controls on ro-ro traffic will, perforce, slow down movement through the ports and, as we have seen many times before, even the slightest perturbation leads to massive queues.

There is no point in saying that we can then adjust to this new situation. Ro-ro traffic hardly existed before we joined the EU. Its exponential growth is a direct consequence of the Single Market. Take away the Single Market and its absence of customs controls and the system can't function.

On the day, therefore, as the system slows down, the queues start. Vehicles late going out become late returning. But, as the system backs up, the ferries and the trains are unable to discharge their loads. The queues then start the other side of the Channel and the system grinds to a halt.

At this late day, though, we have City AM retailing the views of Guy Platten, chief executive of the UK Chamber of Shipping. He says:
An enormous £120 billion of goods moves through Dover alone each year, the vast majority of which is bound for or originates from European markets: that's 17 percent of the UK's total international trade. But if barriers – namely customs declarations and inspections – return at our ports, each of those lorries will have to wait while the paperwork is sorted, perhaps for several hours.

Here is the issue: neither British nor EU ports have the space, never mind the facilities, to park large numbers of lorries. If no positive deal is secured around the negotiation table, then within hours of Brexit finally taking place huge traffic jams will spill onto motorways on both sides of the Channel.

Nothing will disincentivise trade quite like "Operation Stack" becoming a daily occurrence. The "just in time" economy will be replaced by a "we'll see you when we see you" economy, and it could well see exporters and customers alike wondering whether the hassle of trading is worth it. That's a recipe for job losses and economic decline.
Even then, the newspaper gets it wrong, with the facile headline: "Britain risks enormous trade disruption without Customs Union pragmatism post-Brexit". This is nothing to do with the customs union. Freedom of movement and abolition of customs controls comes with the Single Market.

But the point missed is precisely the point of this piece. Come what may, we will be seeing the re-imposition of customs controls. What is absolutely staggering is the almost wilful refusal to confront this, the inevitable consequence of adopting anything other than continued EEA participation (and even that would present problems).

Thus, Platten himself gets it wrong. He labels his own narrative "the worst-case scenario", declaring: "there is every reason to believe it will not come to pass". In fact, there is every reason to believe that it will come to pass.

Of customs checks, he says: "Negotiators can choose to bring them back, and suffer the costs on both sides of the Channel. Or, simply, they could choose not to – protecting jobs and prosperity, not to mention the sanity of businesses and customers, in the process". But no, there is no choice. On leaving the Single Market, we automatically become a "third country". Customs checks automatically follow.

That much is now clear from having a senior customs official finally admitting, in a document marked "sensitive", that there will be such checks and that: "any form of customs controls" will give rise to financial costs and delays. You can bet it's "sensitive".

What he doesn't do is spell out the consequences and, because he doesn't, the newspapers, whose journalists no longer have minds of their own, have nothing to report. They need a "big beast", dripping with "prestige", to lay it out for them and then it will hit the front pages. The legacy media will finally "reveal" something we've already worked out for ourselves, and known for years.

For the moment though, because the prospect of logjams at the ports hasn't been plastered over the front pages of the legacy media, the problem doesn't exist. Nothing exists until some clever journalist has "discovered" it – usually by being told about it from a prestigious source.

However, the fact that officialdom and the media – as well as the politicians - have decided to go into ostrich mode does not mean that the problem does not exist. And, whatever happens, it is bound to stress the system. On the other hand, there are many mitigation measures that could be taken, but none of these can be advanced while everybody is in denial.

Just the technical problems alone require us to work on a war footing, with high-powered working groups and committees in action night and day to devise a solution, chivvied by a prime minister with "action this day" directives.

And that is what is really worrying. Whatever else Mrs May is, she is no leader. She shows no signs whatsoever of galvanising the resources of the state and making things happen to an impossible deadline.

Brexit, welcome though it is, was always going to be a problem of unprecedented proportions. Within the two-year timescale, it was going to require heroic measures to avoid substantial damage and disruption to the economy, in an endeavour where the default value is expensive failure.

Effectively, already, it is too late to minimise the damage. We are now bound to take a hit. And the longer it is left, the longer people remain in denial, the worse it is going to get.

For my part – and for many like me – we need to say that this is not what we voted for. It is not what we wanted. The Kamikaze Brexiteers may revel in they destruction they are seeking, but the best we can say for them is that they know not what they do.

As its worst, a botched Brexit could rival the Great Depression in its effects on the UK economy, returning darkness to the land. At its height, the 1929 depression cost the US some 30 percent of its GDP. We could so easily approach those levels and, knowing the capability of economists to make accurate predictions, there is nobody who could say with confidence that this can't happen.

Destroying our external trade is as good a way as any to trigger an economic depression. Our Brexiteers seem determined that we should have one. Our government seems happy to give them one.