Brexit briefing | Brexit, Governance & Trade Risk, Commercial Law, Trading Law, Commercial & Technology, Supply of goods and/or services |

Brexit and goods trade: what will be the impact?

Overview

Disruption to goods supply chains is widely expected after the Brexit transition period ends on 31 December 2020. Even businesses which are well prepared for new border processes could be caught up in delays. In this briefing, we look at how credible those predictions are, how bad the disruption could be and what you can do to prepare.

The basic problem

Since the EU removed customs formalities at its internal borders in 1993, traffic passing through the port of Dover has doubled to two million HGVs per year (if other Channel ports are included the total would be higher).  At the end of the Brexit transition period, much of the red tape removed in 1993 will effectively be put back into the system.  For example, if an HGV does not have the correct paperwork, it cannot be cleared to enter the UK or the EU (as the case may be) and will either have to wait until the problem can be corrected or be turned back.  Many independent commentators predict that this will result in disruption to supply chains – and the UK Government's own "reasonable worst case scenario" suggests that such delays could lead to queues of up to 7000 HGVs building up at Channel ports. 

New customs checks and poor trader readiness mean that delays at the GB–EU border are inevitable in January.

Institute for Government, "Preparing for Brexit: how ready is the UK?" (November 2020)

Timing and extent of disruption is hard to predict

The precise extent and timing of any disruption is difficult to predict because it depends on a wide range of variables, including:

  • whether businesses seek to avoid use of the Channel ports in early 2021 - either by relying on stockpiles or by using other routes e.g. short sea shipping between UK and EU ports which are already accustomed to dealing with customs processes etc;

  • how quickly businesses can adapt to new border processes (especially those which are initially under-prepared);

  • how strictly EU authorities enforce compliance with new border processes from 1 January 2021; and

  • how the EU and UK authorities respond more generally (for example, whether they choose to put in place additional easements or use other powers available to them – as regards the UK, see textbox below headed "Legislative Powers").

There is likely to be significant disruption at the border from 1 January 2021 as many traders and third parties will not be ready for new EU controls.

National Audit Office, "The UK Border: preparedness for the end of the transition period" (November 2020)

But the weight of evidence points to material disruption

Despite these uncertainties, our view – which accords with that of most independent commentators and the National Audit Office – is that material disruption is likely and may persist for some time. In particular:

  • there are significant concerns over a lack of readiness on the part of both the UK Government and businesses across a wide range of issues, from IT systems and infrastructure to shortages of customs intermediaries, wooden pallets and vets – click here for more detail;

  • although the UK is planning to phase in import controls, the EU will expect full compliance with its normal border processes for third countries from 1 January 2021 – and past experience indicates that it only takes delays on one side of the Channel to cause serious disruption (for example, a recent test of Brexit border procedures by French authorities resulted in substantial congestion on the M20 in Kent);

  • even businesses which are well prepared may face delays, for example because other consignments in the same load do not have the correct paperwork or there is insufficient space at ports to hold those HGVs which are unable to clear customs or require physical inspection;

  • it is far from certain that under-prepared businesses will be able to adapt quickly once they discover that their shipments cannot get through, as the changes required are likely to take time to implement – see our detailed Q&A on goods trade and Brexit.

Customs and logistics experts giving evidence to MPs in September 2020 put the chances of "chaos in Kent" at 50-80%.

These problems are likely to be compounded by the following issues:

  • stockpiles will not last indefinitely and cannot be used for perishable goods – and capacity is also constrained by a shortage of warehousing space;

  • given the volume of trade which currently flows through the Channel ports, it is unlikely to be practical for businesses to avoid this route for any extended period;

  • the additional red tape is likely to prompt some EU suppliers and hauliers to stop serving the UK market altogether and focus instead on customers elsewhere in the Single Market;

  • additional capacity on alternative routes may take time to emerge, as before investing, operators may prefer to wait and see what volume of traffic the Channel ports can cope with given the additional red tape;

  • a number of UK ports which already deal with trade with non-EU countries are themselves suffering disruption as a result of COVID-19 (see, for example, recent press reports on problems at the port of Felixstowe); and

  • the UK's decision to phase in new border processes relating to imports could have the effect of prolonging disruption because it may create a further "cliff edge" at the beginning of July (when full import controls are expected to be introduced – click here for more details).

Finally, modern supply chains are sufficiently complex and interdependent that there are likely to be additional problems which have not been anticipated.

LEGISLATIVE POWERS

If disruption affects supplies of food, medicines or other essential products, the UK Government could potentially use powers under the Civil Contingencies Act 2004 to order transport operators to prioritise shipments of such products. Alternatively, the Government could, as it has done in relation to COVID-19, pass legislation giving itself similar powers. However, a system under which certain goods were prioritised would inevitably lead to other goods (deemed to be less important) being "sent to the back of the queue".

How to prepare

What you need to do depends on where your business sits in the supply chain:

If you rely on goods from the EU which you purchase from e.g. UK wholesalers, click here for guidance. If you rely on goods sourced from outside the EU, don't assume that you will be unaffected – click here to find out what to check.

Our detailed Q&A on Brexit and goods trade also includes guidance on:

Key contacts

Read Jonathan Rush 's Profile
Read Rachel Woodburn's Profile