Brexiteers’ customs option could cost businesses up to €20bn a year

The customs option favoured by Brexiteers in Theresa May’s cabinet could cost businesses up to £20 billion a year and take years to implement, the head of Britain’s Revenue and Customs has told MPs.

Jon Thompson, chief executive of Her Majesty's Revenue and Customs (HMRC), said the maximum facilitation model, or "max fac", would require businesses to pay £32.50 for each customs declaration on goods moving between Britain and the EU.

Mr Thompson told the House of Commons treasury committee that there were about 200 million consignments going into the EU in 2016, with a similar number coming from the EU, suggesting a cost of about £13 billion.

"You've then got the question about what might be the requirements from the European Union on rules of origin. Is this cheese from Cheddar? It's quite difficult to estimate that, but it would be reasonable to think that it is several billions pounds more. So you need to think about the highly streamlined customs arrangement costing businesses somewhere in the late tens of billions of pounds, somewhere between £17 billion and £20 billion. And the primary driver here is the fact that there are customs declarations," he said.

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Customs partnership

Mr Thompson said Ms May’s favoured option of a new customs partnership, which would keep Britain more closely aligned with the customs union, would cost about £700 million to set up but would prove net neutral for businesses. Brexiteers in the cabinet have been pressing the prime minister to opt for the “max fac” model, which would use technology to reduce friction at Britain’s borders.

Downing Street dismissed Mr Thompson's calculation as "speculation" but his evidence has raised the temperature in the debate over the future customs arrangement and the backstop to avoid a hard border in Ireland. Earlier on Wednesday, Brexit minister Suella Braverman admitted that MPs would have to vote on whether to approve Britain's exit payment of £39 billion to the EU before a free trade agreement had been agreed.

Ms Braverman, who was a leading Brexiteer on the Conservative backbenchers before becoming a minister, told the Brexit committee that the withdrawal agreement was not conditional on securing a satisfactory trade deal with the EU.

Financial settlement

“The withdrawal agreement text has been nearly finalised and agreed, that contains issues relating to the financial settlement. At present, it doesn’t contain aspects you talk about on conditionality. There is agreed a duty of good faith and that is an important aspect of the withdrawal agreement which obliges both parties to co-operate in a way, which means we are working constructively towards a future framework which is mutually beneficial and meets our objectives,” she said.

“The prime minister has made very clear that the offer on the financial settlement is made as part of a broader package relating, and in the spirit of our future partnership the two will be connected when we vote in October.”