NAO Audit Report on EU Exit Preparations Forecast Major Disruptions
Updated: Jan 4, 2021
A recent report from the National Audit Office states that, despite UK government's efforts from a range of its agencies, we can expect major disruptions as some Brexit preparations see delays as the UK and the world deal with the continuing impact of COVID-19.
Some areas that the NAO highlighted in previous reports, and the latest report, as being high risk were:
Customs Agent capacity
Due to the pandemic, a lot of the communication aimed at traders and other key stakeholders paused, and only resumed around July 2020.
The UK government also made the decision to introduced a 6-months phased approach to EU imports giving UK importers more time to prepare. This means there will not be full import controls until July 2021, so UK traders will be able to do simplified customs declarations and postponed VAT and import duty payments. This of course has a fiscal risk for the government, and only UK companies considered high-risk traders will be asked to complete customs declarations from 1st Jan 2021.
The report also shows that whilst important progress has been made towards implementing a minimum operating capability by 1st Jan 2021, transit arrangements will be more challenging to deliver in its entirety for this deadline. For instance there are concerns over the delivery of:
Goods Vehicle Movement Service (GVMS): as of Oct 2020 was reported to be in 'amber' status in regards to transit, but 'red' in terms of the readiness of the operator and port controls.
Inland Sites required to facilitate transit movements: again as of Oct 2020, Sites were classified as either red, amber-red or amber, making it unlikely that all sites will be operational by Jan 2021. If this is true, then hauliers will need to make arrangements to use alternative sites which will have an impact on the ease of trade.
New IT Systems: it is not only the government which needs to be ready, key stakeholders must ensure they are integrating their systems with those changed by the government. This has always been a very complex and high-risk, and from this report it seems there are contingency plans. But it is unlikely these will provide all the functionality envisaged in the original plans.
Traders & other key stakeholders readiness: further disruptions are expected as many traders may not be prepared for the new EU controls. As a Chamber we have received an increased number of enquiries from exporters and importers which, worryingly, show that many traders have not taken necessary steps to prepare. Traders are mostly unaware of the new added customs paperwork they will need to carry out, whether we reach or a deal or not with the EU. Whilst the UK is planning a phased out approach for EU imports, the EU is not planning a similar approach for UK imports, meaning full EU importing controls are going to take place from 1st Jan.
Customs Declarations: this is one of the irreversible new steps that UK & EU traders will have to deal with when trading. Currently these are only necessary when dealing with Non-EU markets, but as of 1st Jan, trade with the EU will require these too. The capacity of customs intermediaries has always been a concern, and NAO's October report indicates that this remains in 'red-rated' status.
These are a handful of the areas that the report highlights as concerning. If you want to have a full picture of the current status of Brexit preparations as analysed in this report, check it out the report here