The introduction of post-Brexit customs checks could cost traders more than 4 billion pounds ($5.28 billion) a year, according to a think tank report released on Monday.

The British government has said it plans to leave the European Union’s customs union when it leaves the bloc, and it wants to negotiate a new relationship that will ensure trade is as free of friction as possible.

In its report ‘Implementing Brexit: Customs’, the Institute for Government said the government needed to offer as much certainty as possible to business and help them plan for changes to customs.

Around 180,000 traders now operate only within the EU and face making customs declarations for the first time after Brexit. The government estimates an extra 200 million declarations a year will be made.

Those declarations cost 20 to 45 pounds each, the IfG said, putting the total additional cost at 4 billion to 9 billion pounds.

“The scale and cost of change for many traders could be significant. Government must engage with them in detail about changes, understanding their requirements and giving them as much time to adapt as possible,” the report said.

The government has proposed two options for the future customs relationship. One is a system using technology to make the process as smooth as possible; the second a new customs partnership removing the need for a customs border. It wants a transition period after Britain leaves in March 2019 to allow time to adapt.

However, the EU says negotiating the customs relationship must wait until the two sides have made make progress on the rights of expatriates, Britain’s border with EU member Ireland and a financial settlement.

“To be in and out of the customs union and ‘invisible borders’ is a fantasy,” Guy Verhofstadt, the European Parliament’s coordinator for Brexit, said on Twitter after the British government floated its proposals. “First need to secure citizens rights and a financial settlement”.

Moving customs requirements away from the physical border, retaining access to key EU computer systems and setting up working groups with the private sector on implementing changes are among the report’s suggestions for smoothing the process.

To avoid a cliff-edge, the government must make sure everyone from port operators to freight companies and local authorities is ready, the IfG said. It should also work with EU partners to ensure issues at European ports do not cause significant disruption to supply chains.

“In the past they have been given years to adapt to any government change; they now have fewer than 20 months to prepare without yet being clear what they are preparing for,” the report said. “Successful change relies on all these organizations being ready.”
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