Taking stock: how ready are we for no deal Brexit?

Whilst it is hard not to get caught up in the drama of Political Bake Off with rivals in the Conservative Party vying to be the master baker of Brexit it is not going to be easy being the new Prime Minister. In fact, those that have promised a renegotiated deal or even No Deal may be wishing they had just stayed to do the washing up.

Ireland's prime minister warned British lawmakers on Tuesday, June 11th against making "a terrible political miscalculation" of thinking their rejection of the Brexit divorce deal already negotiated with the European Union will mean they will get a better one. Outgoing European Commission President Jean-Claude Juncker also reiterated on Tuesday that the stalled divorce treaty - including the backstop - will not change with the arrival of a new prime minister in London.

The press release from the European Union on Wednesday, June 12th  did not offer many crumbs of comfort. Recognising that a ‘no-deal' scenario on 1 November 2019 very much remains a possible outcome, the EU has taken stock of its own level of preparedness for a No Deal situation. The press notices provided details on the extensive preparations in the EU27 in areas such as citizens' residence and social security entitlements, customs and taxation, transport, fishing, financial services as well as medicinal products, medical devices and chemical substances.

This was a stark reminder that in a ‘no-deal' scenario, the UK will become a third country with NO transitional arrangements. All EU primary and secondary law will cease to apply to the UK from that moment onwards.In particular concerns have been raised about levels of preparedness in the areas of citizens' residence and social security entitlements; medicinal products, medical devices and chemical substances; Customs;  indirect taxation and border inspection posts; transport; fishing and financial services.

So just how ready are we?

There is still speculation about WHAT pieces of legislation the government need to have passed before No Deal happens. The Institute for Government has produced this rather comprehensive infogram to explain the hurdles that the government must jump through suggesting that there was much still to be done. In February 2019, the National Audit Office (NAO) published an updated assessment of the Government’s preparations for the UK border in the case of a no deal exit and suggested that the delivery of certain new IT systems needed for no deal is “in doubt”.

The problems remains the lack of parliamentary days left to get the legislative House in order. The Agriculture and Fisheries Bill  and the Trade Bill have to be enacted before we leave, deal or no deal, as legislation will need to be in place to replace EU legislation. This is as much about governance gaps as about regulation. Furthermore, it is unclear how many Statutory Instruments (SI’s) still need to be laid to make for the smooth running and function of DEFRA and other government departments, and if any impact assessments accompany them .Colleagues in the environment sector point to the fact that SI’s relating to DEFRA is incomplete and there is the real risk of operability issues in the event of No Deal.

Just as Boris Johnson was launching his leadership campaign this week, the Financial Times revealed a leaked Cabinet document which suggests the government is still a long way off being No Deal ready.  Despite the government pushing out over 100 technical notices  around a whole range of no-deal issues for citizens and businesses in August and September of last year it is obvious there are sectors that will not be ready in time. Prepared for a cabinet discussion on 21 May, the note  was never circulated but makes clear that it will take “six to eight months” to build up supplies of medicines “to ensure adequate arrangements are in place to build stockpiles of medicines” and “at least 4-5 months” to make traders ready for the new border checks that might be required, including incentives to register for fresh schemes. This is before you even start to consider the issue of haulage and the number of permits required to be issued by October 31st - some 11,000 - against the number available to be ready by the end of October - some 950.

The problems surrounding No Deal are compounded by the political uncertainty in terms of leadership and the past problems of Cabinet leaks, a government in contempt of parliament and the future over the mishandling of freight capacity with the Seaborne Freight contract. Little wonder that the civil service finds itself in a risk-averse mode.

The Border

No self-respecting blog on all things Brexit should finish without a mention of the all important border between Northern Ireland and the Republic of Ireland. More importantly, and helpfully, customs lawyers Michael Lux & Eric Pickett have done a paper for the Northern Ireland Department of Economy on trade facilitation options in no deal. This is an attempt by experts to identify actionable solutions on the border between Northern Ireland and the Republic of Ireland whilst recognising that recreating a customs borders could seriously jeopardise the peace dividend of the Good Friday Agreement

There are some interesting suggestions but whatever you put in place (economic free zones, waivers, one-stop shop and single window; joint Customs Offices etc) it is the nature of the trade as well as the issue of the border that presents problems.

There is an estimated 25,000 heavy goods vehicle (HGV) border crossings per day at 42 main crossings points and according to NISRA (Northern Ireland Statistics & Research Agency ) many are involved in what is deemed sensitive goods and products such as milk and agricultural products. But importing sensitive goods and products places special demands on infrastructure as they have to be inspected and the documentation requirements for consignments to the EU  increase significantly for NI producers/traders. Pre-inspection facilitations can decrease the frequency of inspections, but no such arrangements exist on the border.

Will the border be ready for October 30th - even with the best will in the world? This is what business will have to confront  - providing guarantees for potential or actual customs debts, payment of customs duties and import VAT or excise duties due upon import, applying for authorisations, executing and complying with customs formalities, establishing operating procedures for dealing with customs matters and determining what the impact of the new situation will have on business operations and cash flow position. In some cases, particular checks and inspections of imported products are necessary which  may be subject to charges such as that levied for the veterinarian checks

Its something you would hope all aspiring candidates to be Prime Minister will familiarise themselves with but like most things to do with No Deal we seem some way off.

Malene BratlieComment