Officials in the transport sector – the people who keep the British economy moving – are becoming increasingly concerned about the lack of attention paid to some vital practical implications of Brexit, as negotiations between the UK and the EU stall.
- Without clarity on customs arrangements, lorries will be stuck in queues that stretch for miles out of ports.
- Without an agreement over aviation, planes won’t have the legal authorisations needed to fly outside of the UK, not just to Europe but also across the Atlantic.
- Even the largely internal railway system has a great deal at stake, as I discussed back in May.
The longer the UK government prevaricates over its goals in the negotiations, the less time the transport sector has to prepare for what are likely to be complex and costly changes. Aviation officials have said they need certainty in less than twelve months, customs officials want it in six. The government needs to move fast to prevent a standstill after March 2019.
Importance of Ports
90% of UK trade goes through our ports. A Brexit white paper produced by the government shows that 99% of total international road freight to and from the UK goes through the rest of the EU. For example, around £120bn of traded goods pass through Dover alone every year. The UK Chamber of Shipping has said that unimpeded trade through ferry ports should be treated as “non-negotiable”. But if the UK leaves the customs union, as threatened by Theresa May, then a new system of customs checks will have to be introduced in every port across the country.
Dover and Out
The system that currently deals with non-EU trucks in Dover is known as CHIEF (the Customs Handling of Import and Export Freight). CHIEF is set to be replaced in March 2019, and the new system will have to jump from dealing with 60 million declarations in a year to around 300 million. Conservative MPs have often touted electronic checks as a silver-bullet solution but any sort of inspection would require time, staff and money. Specialists have cast doubt on whether the technology and staffing levels the UK will be ready for a reintroduction of full customs checks by March 2019, as we will need at least double the number of customs officials we have now.
Another serious stumbling block is deceptively mundane: many UK ports simply don’t have enough space to cope with increased custom checks. Clearance for customs in Dover currently takes place six miles away from the port, at a truck stop off the M20 with 82 parking spaces. New infrastructure will likely need to be built inland, but such projects take time. The current renovation of Dover’s Western Docks was first proposed in 2007 but it is not estimated to be completed before 2020.
Even if the government were able to implement a viable system of checks, leaving the customs union would still be costly. Each customs declaration costs a trader between £20 and £45, meaning that the total cost to business if we leave the customs union could be up to £9 billion. The HMRC told the Treasury Select Committee that they would have to help 130,000 businesses to adjust to dealing with customs arrangements for first time. Currently, non-EU trucks take up to 20 minutes to go through customs in Dover and any issues with paperwork can cause expensive delays. The Freight Transport Association calculates that delays cost £3.20 per truck per minute. A single day of disruption could cost up to £250 million.
Time is money
Delays are expensive because our modern economy hinges on timing. Manufacturing and retail industries rely on a production model called just-in-time delivery (JIT), whereby companies receive goods at the precise moment that they are needed in the production process, reducing their warehousing costs. If JIT deliveries become unreliable, production lines could be temporarily halted and companies might have to pay for additional stocks to be stored onsite.
Even stocking is no solution for perishable foods. Some 70% of the UK’s food imports by value are from the EU and 60-65% of UK’s agricultural exports are to other member states. Any additional risk of delays would put strain on supply chains and potentially raise food prices. For example, when strikes from French ferry staff in 2015 resulted in 30 mile queues along the M20, an estimated £21 million was lost in stock. In addition, the growing express delivery industry would struggle to operate without the reliable and smooth crossing of the UK border. Same-day delivery could become a thing of the past.
The Channel tunnel illustrates how vital the question of timing is to the transport sector. 1.4 million trucks and 2900 rail freight trains passed through it in 2014, transporting £91.4 billion worth of goods between the UK and the continent, including £195m of iron, steel and metal products from Yorkshire and the Humber. Goods that require the speed and reliability of the Channel tunnel’s service tend to be of a higher value (the average value of a tonne of freight transported through the tunnel is worth almost three times the average) and delays are more costly as a result. The time saved by using the Channel Tunnel was equal to 120,000 days in 2014, saving the average truck £55 per crossing.
Delays due to more customs checks would upend such financial projections and have downstream economic consequences. Businesses and governmental organisations need clarity over the government’s negotiating position so they can plan for post March 2019. The HMRC told the Treasury Committee that it will need to start implementing its customs plans by March 2018 if the possibility of a no-transition scenario is still on the table.
The aviation industry is similarly worried about delays over a deal. To be able to fly across borders, there must be an agreement in place between the countries concerned on schedules, the airworthiness of the aircraft in question, consumer protection and much else besides. For years, we have regulated all that jointly (at lower cost) at EU level. As a result, while we are part of the European Common Aviation Area arrangements (or “Single European Sky”), any British airline can fly anywhere it likes in the EU, not just to, but within another member state, and sell tickets to anyone across the 28 member states without restriction.
The UK aviation sector contributes £52 billion to UK Gross Domestic Product (GDP), in no small part thanks to the ECAA arrangements. As I wrote in March, any Brexit deal must make specific provision for us to stay in the ECAA, or agree completely new systems, failing which there would suddenly be no legal authorisations for UK aircraft to fly. This would be bad enough, but it would also have serious knock-on consequences for the British economy.
The ECAA agreement has had other benefits. It has led to cheaper fares, better consumer protection and compensation, a greater variety of destinations and safer, more environmentally-friendly flights.
Retaining access to the ECAA would require accepting the jurisdiction of the ECJ – one of Theresa May’s infamous red lines. Negotiating new agreements will be complex and time-consuming and despite Transport Secretary Chris Grayling insisting that access to the aviation market “remains a top priority”, no progress has been made, and the industry is starting to worry. There is not even a fall-back arrangement (like the WTO for trade in goods) in the aviation sector, something which Tim Alderslade, chief executive of Airlines UK gave a stark reminder of:
The Government is fully aware that aviation sits outside of the World Trade Organisation system… The principle of ‘no deal is better than a bad deal’ does not apply to us.”
There are several reasons why the aviation industry doesn’t just need a deal, but needs it quickly. Any threat of limiting capacity in a new arrangement would lead to airlines moving bases out of the UK. Indeed, Luton-based easyJet, have already applied for an airlineoperating licence in Austria with the view to establishing ‘easyJet Europe’. Airlines also plan their schedules months, even years, in advance and so a deal on aviation needs to be reached in the first half of 2018 if flights after March 2019 are not to be affected. Just imagine the current Ryanair scenario applied across every airline at the same time!
In the worst case scenario, if the government fails to reach an agreement, planes will simply not be able to fly between the UK and the EU. And the same applies to flights to the United States, since if we leave the EU our current ‘Open Skies’ aviation agreement with them will no longer be valid.
Our transport sector keeps us connected to our closest neighbours and trading partners. It requires infrastructure and administrative systems to run like clockwork in order to avoid costly delays. The slow pace of UK-EU negotiations could result in chaos in ports and on runways across the UK in eighteen months’ time. But warnings from the transport sector seem to be falling on deaf ears. As far as transport is concerned the government hasn’t even left first gear.