The Brexit Border Tax: Background Briefing

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The UK has left the single market, the customs union, and the VAT area – this means it has to manage its borders. To cover the cost of border control points, the Conservative Government is introducing a charge of £29 a time to import each individual consignment of goods into the UK from 30th April 2024 - if this goes ahead it will have very real consequences for our food supply chains and food price inflation. 

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Click here for a suggested CLP motion on this issue. 
Click here to read what the papers are saying about this issue. 

 

Why is the Government introducing a Brexit Border Tax?

The UK is around 54% self-sufficient in growing the food we eat, with the remainder being imported.  Our trade with other countries brings diversity and quantity to our food options. 

  • In 2021 we imported £10bn worth of fruit and vegetables from the EU, £6bn worth of drinks and £6bn worth of meat.
  • The EU accounts for more than 90% of all beef, dairy, eggs, and pork products imported into the UK and nearly two-thirds (65%) of all food and feed not of animal origin.
  • 39% of food and drink imports by value were dispatched from four EU countries (the Netherlands, Republic of Ireland, Germany, and France) in 2020.
  • This is seasonal – at the start of the year, the UK imports 90% of the lettuces it needs from the EU. By the summer, Britain produces 95% of its own salad leaves.
  • The Centre for Economic Performance estimates that food costs are already 30% higher because of Brexit.[1]

 

As a result of Brexit, the UK has left the EU customs union, single market, and VAT area. That means that we now require our own customs controls across our border to ensure goods comply with safety, security, health, and environmental requirements. For example, the National Pig Association recently warned border rules are needed to ensure African swine fever does not reach the UK. It’s highly contagious and fatal for pigs. 

The EU introduced full customs controls on goods coming from the UK to Europe from 1st January 2021. In contrast, the UK Government has been doing this incrementally, with customs declarations now required for imported goods, and some requirements to notify in advance imports of high-risk imports of animals, plants and feed. More formal checks have been postponed five times. However, the British taxpayer has already covered £700m in costs for building border infrastructure – the Sevington operations facility outside Dover where it is intended checks will take place has cost £154m to build, including £70 million on the border control post infrastructure. At other ports, there have also been considerable projects which currently lie empty including a facility in Portsmouth for £25m, £12m on border structures at Holyhead and £3m at these in North Weald.

The UK has already dropped from 4th in the World Bank Logistics Performance Index in 2014 to joint-19th in 2023. The main challenges result from border friction, which is contributing to a decline in on-time shipments, efficient customs processes, and the tracking of shipments. Further paperwork and costs will only exacerbate these problems and damage food supply chains. 

 

[1] Brexit and consumer food prices: 2023 update – Centre for Economic Performance, Jan David Bakker, Nikhil Datta, Richard Davies, Josh De Lyon

What will the Border Target Operation Model mean in practice?

The scheme announced to date has three stages: 

  • 31st January 2024: health certificates are required for medium-risk animal products, plants, plant products and high-risk food and feed of non-animal origin from the EU. The cost alone of export health certificates is estimated to be £160m a year. Many countries in Europe have shortages of veterinarians that can issue the certificates required for higher-risk products. The Government has now admitted that although these certificates were required from the end of January there will be no process to check lorries have them which cross the border. It has not provided any information to European countries as to what these checks should cover stating ‘The Official veterinarian in the exporting country signing the Export health certificate should advise you in what supporting documentation/tests are required for him/her to sign the HC.”
  • 30th April 2024: A ‘common user charge’ will be levied on all imports to pay for physical checking to take place on a selection of imports (expected 30%) from the EU. On the 3rd of April – 28 days before implementation- the Government confirmed this would be £29 per commodity, with each commodity requiring a charge within a freight lorry. It is capped at £145 and is separate from the cost of any Health Certificate. The fee is applied whether the import is one leg of lamb or 200. Though traders will incur the Common User Charge from 30 April 2024 onwards, the first invoices will be issued no sooner than 12 weeks later. After this, they will be invoiced monthly, and DEFRA has said it will consider requests not to pay these charges on a ‘case by case’ basis.
  • 31st October 2024: Safety and Security declarations for EU imports underpinned by the ‘Single Trade Window’ IT system to help manage all trade paperwork. 

 

The Government claims this process in total will cost businesses an extra £330m each year in charges and will only have a small impact on inflation - estimating that it would increase the rate by less than 0.2% over three years. Yet the Government have not set out the data on which this forecast has been made or provided details of what data sources were used. Instead, they have argued their costs represent a saving on their original plans for fees which would have cost businesses £520m a year. The plans to charge for each consignment will especially hit the costs of groupage shipments. Groupage shipments – where different consignments travel together- account for 65% of all goods arriving in the UK according to the Cabinet Office. 

When EU countries applied full customs requirements on British exports in 2021, exports to the EU fell by 40% or 5.6bn, with exports of food and live animals collapsing by 63% according to the ONS. Although volumes have now recovered, it is likely charges coming into the country will have a similar deterrent effect for many small businesses in importing items. This is also proposed against a backdrop of continued problems with trade between Great Britain and the EU. 

  • According to the Federation of Small Businesses 2023 Customs Report, in the last quarter of 2022, almost one in 10 (9%) small businesses had temporarily halted trading with the EU, while 4%-5% had permanently stopped.
  • Between 1999 and 2007, the EU accounted for 50-55% of UK exports. By 2022, this figure had fallen to 42%.
  • The Institute of Export & International Trade point out in total over 20 separate measures requiring new paperwork and costs will come into force between the end of September 2023 and the end of 2024.

 

Freight representatives point out that if lorry drivers need to go through the same entry and exit systems at Dover then they will be in the queues with the school kids and the holidaymakers undergoing checks. They estimate this would equate to around 70 miles of freight traffic – turning dover into a literal lorry park. At present the Government has confirmed these charges only apply to government-run Border Control Posts – they have said it is a matter for commercial operators what they charge elsewhere.   

 

What about Northern Ireland?

The management of this scheme is further complicated by differential arrangements for Northern Ireland. The movement of goods from Great Britain to Northern Ireland are covered by the Windsor Framework, so are not changed by these proposals. The framework commits to unfettered access for goods from Northern Ireland moving into Great Britain for consumption as long as they are ‘qualifying Northern Ireland goods’. There will be new arrangements for traders moving food and feed products, which will need to be owned or processed in Northern Ireland by a NI registered food or feed business to be considered a ‘qualifying good’. Furthermore, controls will be phased in on non-qualifying goods and the Government need to take measures to ensure that the scheme is not abused.

 

What do Businesses say about this charge?

  • William Bain, Head of trade at the British Chambers of Commerce said “with food price inflation running way in advance of the headline inflation rate, this would be a wrong ‘tax’ on business at the wrong time. Its impact would be particularly harsh on smaller importers bringing in smaller, lower value shipments”[2].  
  • Shane Brennan, Chief Executive of the Cold Chain Federation “These new burdens aggregate up to millions of pounds in friction costs. The reality is that many EU based food producers will take the decision not to service the UK anymore. That is exactly what happened for as many as a third of the UK based food producers immediately after 1 January 2021[3]”. 
  • Nichola Mallon, Logistics UK’s Head of Trade Policy “businesses have still not been given all of the detail and guidance they need to plan and prepare. … there is a high risk of delays, traffic congestion, higher prices, and reduced choice for UK customers.”

 

The LME is campaigning for the following to alleviate concerns about bio security:

  • A veterinary deal would remove the requirement for export health certificates.
  • Signing up for shared bio security alerts systems with European trading partners.
  • Joining the Pan European Mediterranean Convention – which is wider than the EU as Israel and north African countries are part of it- would help too because then businesses could make use of the hubs within the EU where products from outside are often consolidated.

 

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[1] Brexit and consumer food prices: 2023 update – Centre for Economic performance, Jan David Bakker, Nikhil Datta, Richard Davies, Josh De Lyon

[2] William Bain, quote to the Financial Times 13th June 2023.

[3] Shane Brennan, UK in a changing Europe article, 6th April 2023