Business Contingency Planning For A No Deal Brexit

Richard Burnett, Chief Executive of the Road Haulage Association, Martin McTague, Policy and Advocacy Chair of Federation of Small Businesses, Andrew Opie, Director of Food and Sustainability at British Retail Consortium, and Mike Thompson, Chief Executive of Association of the British Pharmaceutical Industry appeared before the Committee for Exiting the European Union. They gave evidence on contingency planning being undertaken by businesses large and small in the event of a no deal Brexit.

Stephen Kinnock: Good afternoon, gentlemen. I just wanted to touch on the White Paper, the Chequers agreement and particularly the two aspects of it around the trading relationship that the European Union has cited as the reasons for why it will not fly. The first is about the common rulebook for goods not including services. The point that the European Union makes is that 20% to 40% of the value of trade in goods is underpinned by exchange in terms of services. I would be interested in your perspective on that—I am just trying to get a sense of the extent to which the difference between goods and services has elided. It may be that certain of you on the panel see that more than others; for example, in the transport industry, exchange in services is very important, and also, I would assume, in pharmaceuticals and many of the smaller businesses as well. I would be interested in your feedback on that first major concern about the EU around the common rulebook being outside the broader scope of the single market for services.

Richard Burnett: Again, it comes back to the definition of “services”. From a transport perspective, if you look at the industry and you look at the imbalance from a European perspective, in terms of the volume that goes from the UK into Europe, we only cover about 15% of that volume. 85% is delivered in and, I guess, volume back out to Europe by European hauliers. It is critically important from their perspective that they maintain that element of service.

Nothing has been discussed or talked about in terms of the deal yet. We are restricted in terms of how we can trade and how we will access Europe. What is really interesting is that, from our perspective, we are seeing European businesses already contacting British hauliers to say that European hauliers are walking away from coming to the UK next year contractually. They do not want to be part of the risk of what may happen. The problem with that is that, at this stage, from a British-haulier perspective, we have no guarantees of being able to look at the trade in reverse, because we have no access in the event of no deal.
From our perspective, it is a challenging picture and it is one that, certainly at this point in time, is not clear how it is going to play out.

Stephen Kinnock: Based on your perspective and your experience at the coalface, so to speak, you see where the EU is coming from in terms of the reasoning around why this was one of the factors that led them to the view that the Chequers proposals were a non-starter. Do you see where they are coming from, from that perspective, because you agree that the difference between goods and services is elided, to a very large extent?

Richard Burnett: Yes.

Mike Thompson: I would not want to comment on the political position of the EU on this. What I would say is that, if you look at WTO rules, then we can see that, if you do not have a free trade agreement that is all-encompassing, life gets very complicated indeed. As you know, you have to work out on a medicine the different components of it and where they have come from—different countries—and, therefore, what tariffs may be associated with individual elements of that to work out how much you are going to pay. These things can get enormously complicated and take up a huge amount of resource and time to do. We have benefited hugely from being in a free trade system and that is what we are looking to remain in.

Martin McTague: I acknowledge your opening remarks about the line between goods and services becoming blurred and many companies supplying a mixture of the two, but that seems to me to be a classic case where negotiations thrive in blurred areas. I assume that that is the way that this negotiation will proceed. We do not have any evidence to support the assertion that the EU would find that difficult.

Stephen Kinnock: My second and final question was on the other factor that the EU has objected to in the Chequers proposal, which was the facilitated customs arrangement. That was, in essence, about goods going from the UK to the EU or to other third countries, and in essence, the EU should delegate responsibility to the United Kingdom administration to determine what the destination of the goods was and, therefore, what kind of tariffs and non-tariff barriers should apply. You are not at all speaking for the Government here but it is a vital relationship, I guess—your relationship with the HMRC and the CDS system. I guess you have seen, first hand, how that all works. The point the European Union was making was that that was not workable and that they could not delegate that responsibility. Is that a point that you could see, based on your experience? That may be something more for Mr Opie.

Andrew Opie: I cannot really comment on the workability of it, but what I could say is that we are concerned about the additional burdens that it might place on businesses themselves in terms of their relationship with HMRC and where they then have to claim back tariffs potentially on product. The additional burden is what we have looked at, rather than the workability of the scheme, and we feel it would add burden to our businesses.

Stephen Kinnock: Did you at any point get asked by the Government about these proposals for a common rulebook for goods and not services, and the facilitated customs arrangement? They are at the heart of the Chequers proposal but, from what you are saying, you would have raised some questions about their workability.

Richard Burnett: By virtue of the fact that we are under NDA, there is a fair bit of detail that sits behind that, which we cannot talk about. However, it is fair to say that it is not the most simplistic of processes and, in terms of the facilitated customs arrangement, I guess what we have seen so far would suggest that it is quite a complicated process. It certainly would be a very complicated process for us to administer, and that is one of the things that we are very concerned about as an industry. From that perspective, are Government listening? No, they are not listening. They are not listening to the concerns that are being raised about the workability of that system. Would that raise concerns? Possibly.

Stephen Kinnock: In essence, the Government went ahead with the proposal. I know there are certain things you cannot disclose but you were clearly expressing a high degree of scepticism about the workability of those proposals, and yet the Government went ahead anyway. Richard Burnett: We have engaged, sat down and gone through “a day in the life of” to understand what all the handshakes would be, what we would need to do and what we would need to accommodate in order to make that work, and I guess what we are saying at this point in time is that it is a very complicated process that we believe will not work. Therefore, if we believe that, there may be some concerns elsewhere.

Mike Thompson: Just to say, in my sector, we have the Falsified Medicines Directive, which is being implemented at the moment, where we are putting a barcode on every single medicine. Therefore, there is a system to track those medicines up to the point of dispensing. Provided that we implement that, there is full traceability. Again, we have a rather unique solution, which probably is not much help to Government, but it shows why medicines can continue to be part of a free trade agreement in Europe and we will be able to work that very effectively.

Richard Burnett: Could I just add another point in terms of declarations? The complexity of where this really comes from is the number of consignments that we would need to administer. At the moment, everything flows through, but there is a scale here where individual consignments would have to be declared. If you think about a trailer that is coming through at the moment, which just flows through with 5,000 consignments on it, each individual one would need to be highlighted. That is quite complicated.