Small Businesses Welcome Interim Customs Union Plans

David Davis and Michel Barnier. (C) European Commission.

The UK Government has laid out plans for a transitory customs union with the European Union that will come into force on the day the UK leaves the European Union.

In the first of a series of papers due for release on the UK's future partnership with the EU the Government sets out new details on an interim period with the EU which would see a close association with the EU Customs union for a time-limited period.

The interim agreement would ensure UK businesses only have to adjust once to new trading arangements.

The union would seek to ensure businesses have time to prepare for the final trading agreement reached in Brexit negotiations.

David Davis, Secretary of State for Exiting the European Union, says he envisions the arrangement being "as close as we can to the current arrangements".

The news has been welcomed by the UK's small business community who have long called for such an arrangement.

"Today's commitment from the government would give small businesses the time they need to prepare for new customs arrangements, which is very welcome,” says Mike Cherry, National Chairman at the Federation of Small Businesses (FSB).

Cherry is however cautious on the Government’s ability to actually deliver on its plan noting that “it is essential that this interim deal is negotiated as soon as possible with the EU Commission, to give businesses the certainty to keep investing in the UK.”

Indeed, initial grumbles coming off the Continent suggest the plan won’t be accepted in its current format with Karel De Gucht, a former Commissioner, warning that the plans being put forward today by the Government as “very problematic” and at odds with Brussels’ ideas for a transitional period.

Resolving the issue will be key to the ability of UK small businesses to trade. The FSB say 63% of small businesses would prioritise an FTA with the EU, 49% would prioritise an FTA with the US and 28% with China.

“Beyond the interim period it is essential that new customs arrangements achieve the most frictionless trade with small businesses as possible. Our research shows that non-tariff barriers are just as important as tariff barriers in determining where small businesses export to. Engagement with small businesses is essential to develop a new customs relationship with the EU that enhances trade and successfully capitalises upon the opportunities offered by digital technology,” says Cherry.

Davis told the BBC’s Today programme that businesses were worried about "the infamous cliff edge" - the UK leaving the EU without replacement trade and customs deals.

"We've got a new customs system coming in," he said. "It will be in a few months before we leave but it would be much more sensible, we think, if there was a shortish period in which we maintain the current arrangements."

He added that the period should be "something like two years, maybe a bit shorter" but said the transition period had "to be done by the election", which has to take place by 2022 at the latest.