A cross-party committee of MPs has warned that the UK may have no choice but to remain in the EU's customs union beyond the end of the transition period in December 2020 if alternative trade arrangements cannot be agreed. The Brexit select committee described the current situation as 'highly unsatisfactory', noting that ministers have yet to decide on their preferred customs model.
The committee stated that extending the current customs union arrangements 'will be the only viable option' in the absence of a concrete plan. The customs union allows goods to move between members without tariffs, and the government has pledged to maintain 'frictionless' trade and avoid a hard border in Northern Ireland after Brexit.
Two options have been proposed by the UK to replace the customs union: a 'customs partnership', under which the UK would collect EU-set tariffs on goods entering the country, and a 'maximum facilitation' approach that would use technology to minimise customs checks. However, the committee warned that neither option might be ready in time.
The report also highlighted that removing customs checks is not the only challenge for frictionless trade, as much of the trade is regulated through the EU's single market, which the UK is also leaving. The HMRC chief executive, Jon Thompson, told MPs that the 'maximum facilitation' solution could cost businesses up to £20 billion annually, with firms paying £32.50 per customs declaration.
Justice Secretary David Gauke acknowledged the £20 billion figure as the 'top end' of Mr Thompson's estimate but said the government is working to keep costs as low as possible while ensuring frictionless trade and the ability to strike trade deals with other countries.
