On December 31, 2020, at the end of the Brexit transition period, the United Kingdom will leave the European single market, eleven months after leaving the Union. "Our rules will not be aligned (with those of the EU), we will not be in the single market and we will not be in the customs union ", explained, on January 17 at Financial Times, Sajid Javid, Chancellor of the Exchequer in charge of finance.
This decision is politically logical: what is the point of leaving the EU, Friday January 31, if it is to continue to follow its rules in the long term? But economically, that changes everything. This means that, even in the event of a free trade agreement between London and Brussels – while negotiations look set to be complicated in the coming months – there will be border checks for British goods exported to the 27 (and vice versa). The controls will be carried out at the end of the transition period, i.e. from 1st January 2021. This date may theoretically be postponed, but Boris Johnson, the Prime Minister, has ruled out doing so.
As with Switzerland – which is in the single market but not in the customs union – there will be few physical checks on trucks: probably around 3 to 4% of vehicles. On the other hand, each heavy goods vehicle or container must have completed the necessary formalities: export declaration on the British side, import declaration on the European side, declaration of "Rules of origin" also. These are quite complicated and costly to implement. They make it possible to check whether a good can officially be qualified as 'British' (in order to avoid, for example, that a car made in the United States to which one would just add the mirrors in the United Kingdom is treated as "made in Britain".)
City to lose "financial passport"
What if Brussels and London managed to get along, by signing an agreement this year "Without customs duties or quotas", as Boris Johnson aims? This would reduce the bill for trade, but only partially. From the moment that verifications and declarations are necessary, exporting will cost more. Depending on the sector, the additional cost (excluding customs duties) would vary between 5% and 10%, according to a study by research firm Oxford Economics. For goods with high added value, the shock is absorbable. For sectors with low margins, it is more difficult.
