HMRC head warns post-Brexit customs checks could cost £20 billion

The Government is currently considering two options for the UK’s trading relationship with the EU, for which the HMRC has been undertaking extensive work to assess the practical and cost implications. The two options are explained (by the BBC) as follows:

1. A 'highly streamlined' customs arrangement - This would minimise customs checks rather than getting rid of them altogether, using new technologies and things like trusted trader schemes, which could allow companies to pay duties in bulk every few months rather than every time their goods crossed a border
2. A customs partnership - This would remove the need for new customs checks at the border. The UK would collect tariffs set by the EU customs union on goods coming into the UK. If those goods didn't leave the UK and UK tariffs on them were lower, companies could then claim back the difference.

Giving evidence to the House of Commons Treasury Committee on 24 May, HMRC chief executive Jon Thompson commented on the Government’s two proposed options for the UK’s post-Brexit trading relationship with the EU. In 2016 there were 200 million consignments within the EU. Treasury Committee members asked Jon Thompson to share his assessment of costs for a proposed ‘highly streamlined’ or ‘maximum facilitation’ (Max Fac) option, to which he replied:

“For Ministers, we’ve settled on £32.50 per customs declaration. So you’ve got 200 million customs declarations at £32.50; that’s £6.5 billion.” And taking into account additional declarations on the EU side: “You double that number, probably. That takes you to £13 billion. You’ve then got the question about what might be the requirements from the EU on rules of origin – you know, is this cheese from Cheddar? That’s quite difficult to estimate but it would be reasonable to think that it’s several billion pounds more. So I think you need to think about a ‘highly streamlined’ customs arrangement costing businesses  somewhere in the late teens of billions of pounds – somewhere between £17 billion and £20 billion.”

Asked about PM Theresa May’s preferred option of a new customs partnership with the EU, Jon Thompson said:

“Switching to the new customs partnership, what it tries to deliver is the frew flow of goods between the 27 [countries of the EU] and the UK without customs declarations, it then avoids those costs that I gave you for the highly streamlined model.”

The Treasury Committee heard that the set-up costs for new customs partnership would be £700 million, which HMRC claimed would pay for itself. The system would be complicated to set up and might not be ready until 2023, later than the high-tech ‘streamlined’ option.
Downing Street later described the £20 billion figure as “speculation”.

As a Daily Telegraph article report pointed out, £20 billion is around twice the size of Britain’s current net annual contribution to the EU budget. The HMRC had been called to give evidence following a report in the Daily Telegraph in May 2018 stating that HMRC believed, “Theresa May’s plan for a customs partnership with the EU is ‘unviable’.”

Analysis of the impact of Brexit on UK-EU trading, including food and agriculture import and export data, by value, was published in 2017 by the European Parliament.