Most firms that export only to the EU do not have the paperwork they need to carry on their business after a no-deal Brexit, government figures suggest.
The Liberal Democrats said the statistics showed that no deal, which increasingly seems to be the outcome ministers think is most likely, would be a “wholly irresponsible political choice”.
But their analysis was disputed by the government, which claimed that, even though only a minority of firms have already acquired the right documentation, these are the firms responsible for the bulk of exports to the EU.
After the UK leaves the EU, firms that trade with their EU counterparts will need an economic operator registration and identification (EORI) number to comply with customs rules.
Firms that export and import beyond the EU already have an EORI number, but registration has become a pressing issue for the 245,000 who trade internationally only within the EU. A no-deal Brexit would be particularly difficult for them because, instead of having current rules apply during a transition, they could find their trading opportunities shut down after 31 October without an EORI number.
If the UK leaves the EU without a deal it would by default, become a “third country”, with no overarching post-Brexit plan in place and no transition period. The UK would no longer be paying into the EU budget, nor would it hand over the £39bn divorce payment.
The UK would drop out of countless arrangements, pacts and treaties, covering everything from tariffs to the movement of people, foodstuffs, other goods and data, to numerous specific deals on things such as aviation, and policing and security. Without an overall withdrawal agreement each element would need to be agreed. In the immediate aftermath, without a deal the UK would trade with the EU on the default terms of the World Trade Organization (WTO), including tariffs on agricultural goods. This has also been referred to by government ministers as an "Australia-style deal". Australia does not have a free trade agreement with the EU.
The UK government has already indicated that it will set low or no tariffs on goods coming into the country. This would lower the price of imports – making it harder for British manufacturers to compete with foreign goods. If the UK sets the tariffs to zero on goods coming in from the EU, under WTO “most favoured nation” rules it must also offer the same zero tariffs to other countries.
WTO rules only cover goods – they do not apply to financial services, a significant part of the UK’s economy. Trading under WTO rules will also require border checks, which could cause delays at ports, and a severe challenge to the peace process in Ireland without alternative arrangements in place to avoid a hard border.
Some no-deal supporters have claimed that the UK can use article XXIV of the General Agreement on Tariffs and Trade (Gatt) to force the EU to accept a period of up to 10 years where there are no tariffs while a free trade agreement is negotiated. However, the UK cannot invoke article XXIV unilaterally – the EU would have to agree to it. In previous cases where the article has been used, the two sides had a deal in place, and it has never been used to replicate something of the scale and complexity of the EU and the UK’s trading relationship.
The director general of the WTO, Roberto Azevêdo, has told Prospect magazine that “in simple factual terms in this scenario, you could expect to see the application of tariffs between the UK and EU where currently there are none”.
Until some agreements are in place, a no-deal scenario will place extra overheads on UK businesses – eg the current government advice is that all drivers, including lorries and commercial vehicles, will require extra documentation to be able to drive in Europe if there is no deal. Those arguing for a “managed” no deal envisage that a range of smaller, sector-by-sector, bilateral agreements could be quickly put into place as mutual self-interest between the UK and EU to avoid introducing or to rapidly remove this kind of bureaucracy.
Chuka Umunna, the former Labour MP who is now the Lib Dem Treasury and business spokesman after defecting to the party, said he had obtained figures from the government showing that just 66,000 of these traders had an EORI number. He said that at the current rate of progress it would take until 2021 for all firms to get the paperwork they need.
“These figures reveal that an overwhelming majority of UK exporters to the EU are unprepared for a no-deal Brexit and will not be in a position to deal with the mountain of red tape and bureaucracy it will burden them with on 31 October,” Umunna said.
“Pursuing a no-deal Brexit is a wholly irresponsible political choice of the new administration for which there is no mandate and which will put businesses and jobs at risk.”
HMRC has not challenged the Lib Dem figures, but a source said those firms that had already registered for an EORI number accounted for almost three-quarters of the total volume of trade undertaken by firms that traded solely with the EU.
An HMRC spokesman said it was doing all it could to get firms ready for Brexit and that getting an EORI number was “simple and free” and could be done online.
