A glitch and new red tape leave UK exporters facing EU border disruption
Hauliers exporting goods to the European Union have faced fresh disruption since the turn of the year as a glitch in the UK’s digital customs system and new demands from French authorities threaten delays.
Drivers heading to ports in the first few days of January found they were unable to enter details of shipments in the government’s Goods Vehicle Management System (GVMS) because it did not recognise the change in year to ‘2023’.
Hauliers exporting canned foods to the EU via France meanwhile face new demands that paperwork be presented only translated into French, leading to dismay among trade groups at the lack of certainty around border controls two years after Brexit.
The GVMS was introduced in 2020 to coordinate post-Brexit exports to the EU by linking vehicles to customs declarations required since the UK left the EU.
The system requires each shipment to enter a unique Movement Reference Number, which begins with a prefix code containing the year and the country of origin.
Exporters, hauliers and customs agents trying to ship goods on routes between the UK and Holland in the first two days of the year found the system would not accept the new prefix ’23GB’.
Instead of a smooth automated process through the border, they were required to drive to inland border facilities to get oral confirmation from Border Force officials, and have documentation hand-stamped.
HM Revenue and Customs, which manages GVMS, confirmed there had been a problem with the system but said disruption was “minimal”.
An HMRC spokesperson said: “We experienced technical difficulties with the GVMS for a short period on Monday and it is now fixed.
“A few traders were sent to our Inland Border Facilities, where we worked closely with them to ensure they reached their destination as quickly as possible. We apologise for any disruption caused.”
In a separate challenge for British exporters, the French authorities have begun demanding that some paperwork for food exports, known as attestations, be provided only in French and threatening to refuse goods that do not comply.
French authorities are making new demands of some UK exporters
The new rules, unilaterally announced with just three days’ notice on 28th December ahead of planned introduction on 1 January, require paperwork for “shelf-stable composite goods” – tinned goods, sweets and similar – to be provided in French only.
In communication sent to the UK authorities the French Veterinary and Phytosanitary Inspection Service (SIVEP) said: “As English is not the official language of SIVEP border control posts, this leads to difficulties in understanding and may lead to errors of assessment of the validity of the documents presented.
“Therefore, in order to facilitate the control of the attestations by SIVEP agents, you will have to provide a private attestation in French as from the 1st of January 2023.
“Otherwise, all shipments accompanied by a private attestation written in a foreign language after this date will be blocked at the border control post.”
Following a negotiation with the French, the Department of Environment, Food and Rural Affairs has negotiated a delay to the new rules until 15 January, but they cannot be prevented as they are an interpretation of rules covered by the Brexit deal.
Shane Brennan, chief executive of the Cold Chain Federation, told Sky News the changes to rules will undermine exporter confidence.
“Two years past Brexit and we now live with the reality that the way the rules are interpreted can change from one day to the next.
“It leaves us with an ongoing unease that undermines confidence and prevents businesses from seeking out new customers, making investments, or settling into new long term business structures.”
First things first: don’t panic.
What you need to know is this. The budget has not gone down well in financial markets. Indeed, it’s gone down about as badly as any budget in recent years, save for Liz Truss’s mini-budget.
The pound is weaker. Government bond yields (essentially, the interest rate the exchequer pays on its debt) have gone up.
That’s precisely the opposite market reaction to the one chancellors like to see after they commend their fiscal statements to the house.
In hindsight, perhaps we shouldn’t be surprised.
After all, the new government just committed itself to considerably more borrowing than its predecessors – about £140bn more borrowing in the coming years. And that money has to be borrowed from someone – namely, financial markets.
But those financial markets are now reassessing how keen they are to lend to the UK.
The upshot is that the pound has fallen quite sharply (the biggest two-day fall in trade-weighted sterling in 18 months) and gilt yields – the interest rate paid by the government – have risen quite sharply.
This was all beginning to crystallise shortly after the budget speech, with yields beginning to rise and the pound beginning to weaken, the moment investors and economists got their hands on the budget documentation.
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Chancellor challenged over gilt yield spike
But the falls in the pound and the rises in the bond yields accelerated today.
This is not, to be absolutely clear, the kind of response any chancellor wants to see after a budget – let alone their first budget in office.
Indeed, I can’t remember another budget which saw as hostile a market response as this one in many years – save for one.
That exception is, of course, the Liz Truss/Kwasi Kwarteng mini-budget of 2022. And here is where you’ll find the silver lining for Keir Starmer and Rachel Reeves.
The rises in gilt yields and falls in sterling in recent hours and days are still far shy of what took place in the run up and aftermath of the mini-budget. This does not yet feel like a crisis moment for UK markets.
But nor is it anything like good news for the government. In fact, it’s pretty awful. Because higher borrowing rates for UK debt mean it (well, us) will end up paying considerably more to service our debt in the coming years.
Rachel Reeves leaving 11 Downing Street before the budget. Pic: PA
And that debt is about to balloon dramatically because of the plans laid down by the chancellor this week.
And this is where things get particularly sticky for Ms Reeves.
In that budget documentation, the Office for Budget Responsibility said the chancellor could afford to see those gilt yields rise by about 1.3 percentage points, but then when they exceeded this level, the so-called “headroom” she had against her fiscal rules would evaporate.
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In other words, she’d break those rules – which, recall, are considerably less strict than the ones she inherited from Jeremy Hunt.
Which raises the question: where are those gilt yields right now? How close are they to the danger zone where the chancellor ends up breaking her rules?
Short answer: worryingly close. Because, right now, the yield on five-year government debt (which is the maturity the OBR focuses on most) is more than halfway towards that danger zone – only 56 basis points away from hitting the point where debt interest costs eat up any leeway the chancellor has to avoid breaking her rules.
Now, we are not in crisis territory yet. Nor can every move in currencies and bonds be attributed to this budget.
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Markets are volatile right now. There’s lots going on: a US election next week and a Bank of England decision on interest rates next week.
The chancellor could get lucky. Gilt yields could settle in the coming days. But, right now, the UK, with its high level of public and private debt, with its new government which has just pledged to borrow many billions more in the coming years, is being closely scrutinised by the “bond vigilantes”.
A Halloween nightmare for any chancellor.
The next five years will hurt disposable income and wages will stagnate further following Chancellor Rachel Reeves’ budget, an influential thinktank has said.
Household disposable income, or living standards, will be the worst under any Labour government since 1955 when inflation is factored in, the Resolution Foundation said.
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The thinktank also said pay will stagnate in the middle of the parliament as higher inflation lessens pay rises and growth is slowed in an already challenging economic environment.
It will mean that in 2028, pay adjusted for inflation – real wages – is forecast to have grown on average by just £13 a week over the past 20 years, according to analysis from the foundation.
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Budget explained in 60 seconds
Previous analysis from the thinktank showed weekly wages had increased by just £16 in 14 years when inflation was factored in.
But the foundation added that households’ disposable income will grow more throughout the five-year parliamentary term than the last – by an expected 0.5% a year, compared to 0.3% under the Conservative government.
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Rising prices
Prices will rise more because of the budget and growth will be weaker in part due to the rise in employer’s national insurance, it added.
Inflation will rise as a result of employers passing on the national insurance contributions to customers, the introduction of VAT on private school fees and the reform of vehicle tax, the Office for Budget Responsibility (OBR) said.
The OBR predicts UK economic growth to be 1.1% in 2024, peaking at 2% in 2025 before falling to 1.85% in 2026, 1.5% in 2027, and 1.5% in 2028 before rising again to 1.6% in the final year of the parliament.
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The OBR reached the same conclusion as the Resolution Foundation on disposable income. It also anticipates it will grow just over 0.5% a year.
Some positive response
The International Monetary Fund (IMF) has broadly welcomed the UK budget, praising the proposed debt reduction targets and tax-raising measures.
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The focus on boosting growth and increasing public investment was singled out in their comment as was the move to having only one fiscal event, a budget, a year.
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