Research and analysis

Qualitative research on changes in trader behaviour: research report

Published 15 July 2025

Qualitative research with UK traders.

HM Revenue and Customs (HMRC) Research Report 776.

This research was commissioned under the Conservative administration (2010 to 2024), and was conducted by IFF Research between September and November 2018.

The findings in this report reflect the attitudes of participants at the time it was conducted.

Prepared by IFF Research (Emma Moselen, Matt Barnes, Rob Warren, Zainab Hazel and Kyle Robertson) for HMRC.

Disclaimer: The views in this report are the authors’ own and do not necessarily reflect those of HMRC.

1. Executive summary

1.1 Background

HM Revenue and Customs (HMRC) commissioned IFF Research to undertake a programme of qualitative work with traders to understand possible changes to behaviour after the UK’s exit from the EU in March 2019.

This research specifically looks at 2 potential scenarios for the UK’s exit, namely: a Facilitated Customs Arrangement (FCA) whereby the UK would apply the EU’s tariffs and trade policy for goods intended for the EU, and its own for those intended for the UK and a Day 1 No Deal (D1ND) scenario, under which existing regulations for non-EU trade could apply to all goods imported to or exported from the UK.

1.2 Methodology

IFF Research conducted 49 in-depth interviews, some by telephone and some face-to-face. Forty one interviews were with UK traders; 16 with businesses and 25 with intermediaries, which includes freight forwarders, customs agents or brokers, fast parcel operators and hauliers. Eight interviews were conducted with international traders: 1 with a business and 7 with intermediaries. The interviews achieved are not intended to be fully representative of all traders.

Participants were screened to ensure that at least a third of their trade was between the UK and EU. We also ensured that we spoke with participants who work in a range of sectors, are located across the UK and work in organisations of varying sizes.

1.3 Key findings

1.3.1 What is the current situation and how prepared do traders feel for the UK leaving the EU?

In terms of current trading practices, businesses tended to move goods according to a balance of 3 factors: cost, timing, and reliability, with the former being the most significant. The most common method of transport between the UK and the EU was road and sea ferry. Air freight was less common and tended to be deployed for urgent cases or for long distances to rest of the world^{[footnote 1]} countries. Businesses tended to use third parties, for those that did, they were often reliant on them to decide the details of transport, such as which ports were used.

Typically, businesses were unfamiliar with customs simplifications, authorisations or procedures and were unsure of how useful they would be to their business. Despite represented businesses being confident that intermediaries would be familiar with them, intermediaries also tended to have little knowledge in this respect.

At the time of this research, traders reported feeling unprepared for the UK’s exit from the EU. This was a source of some frustration. The desire to plan was there, but traders felt constrained in their ability to do so due to a lack of clarity over what would happen regarding EU exit. This was felt more keenly by smaller firms, who were concerned about allocating resources to steps which may prove redundant.

There was a consensus that, whatever the nature of the UK’s departure from the EU, there would be a period of ‘hiatus’ where new customs procedures are implemented. The most notable manifestation of this from a trader’s perspective was anticipated delays at ports as traders and customs officers become familiar with new trading regulations. Traders also anticipated a drop, at least initially in the value of Sterling, which they feared may have a negative impact on their business.

Interviews revealed something of a disjuncture between businesses and intermediaries, in that each expected that they would follow advice or directions from the other. Intermediaries’ activities are led in large part by their clients, while businesses felt that intermediaries would help them navigate new trading regulations, whichever shape they may take.

1.3.2 How might traders change their behaviour under a Facilitated Customs Arrangement (FCA) scenario ?

When considering potential changes to behaviour under a FCA scenario, there was a distinction between the short-term and long-term impacts to behaviour. Traders typically expected some degree of disruption and change in the period immediately following the UK’s exit from the EU, but they did not generally expect any significant changes in the long run.

At the time of research, traders reported being uncertain about what would be required of them under a FCA and, as such, did not feel prepared for such a scenario. However, traders were confident in their ability to navigate any required changes to regulations ‘on their feet’, and, from a business perspective, there was a clear consensus that a FCA was preferable to a D1ND scenario.

In terms of specific elements of trader behaviour, traders did not expect to see a difference in the markets that they trade with under a FCA, anticipating that they would continue with their current clients and in the same places. Likewise, in the long-term they did not expect any changes to their supply chain, or in the volume and frequency of trade. However, some did anticipate a short-term decrease. This is due to an expected period of disruption and delays at ports.

In general, traders viewed the modes of transport they employed as fixed, having been chosen for their suitability to the job, cost-effectiveness, and time efficiency. As such, they did not anticipate any changes in this respect. This was also true of ports of entry, at least for the most part. Some intermediaries did suggest that, in anticipation of delays at Dover, they may consider switching to alternative ports, for example northern ports.

In terms of customs procedures, a key concern under a FCA was the requirement to provide evidence of the final destination of goods, to determine which tariff they would be expected to pay. Some were unsure of their ability to do so, either because of the type of goods they trade, like car parts or, because this information gathering is not built into their current business practices and IT systems. Some expressed concerns over their current software and IT capabilities and expected that they may need to upgrade in order to meet new requirements of reporting final destinations.

As a result of concerns over the requirement to provide evidence of the final destination of goods, some businesses felt that there may be an increased demand for the use of intermediaries under a FCA scenario. However, this view was held less widely, and many did not anticipate an ongoing increase in their use of intermediaries. Additionally, intermediaries expressed strong concerns over their ability to prove the final destinations of goods being moved, particularly the time and resources that would be needed to chase clients for evidence of the end destination of goods being moved.

Lack of familiarity with customs simplifications, authorisations, and procedures meant that traders were not clear on anticipated changes under a FCA. Traders, and particularly businesses, were keen to have more clarity on this issue.

1.3.3 How might traders change their behaviour under a D1ND scenario?

At the time of this research, traders did not feel fully prepared for a D1ND scenario and said that they felt less prepared for this than exit options with longer transition periods and that they require fewer changes to current customs procedures. At this stage, few traders had taken steps to prepare for a D1ND scenario.

In terms of specific elements of trader behaviour, UK traders felt that their markets are likely to shrink in size as manufacturers move offshore and intermediaries move their trade routes to avoid the UK where possible. However, few had taken action in this respect so far. There were also differences by trader, with those dealing in niche goods, for example, specialised with less competition in their markets, feeling more protected from the changes. In terms of volume and frequency, traders said that they expected to run larger and less frequent shipments, on the presumption that customs tariffs would be flat.

Few traders felt it likely that they would make any changes in their supply chain. However, some intermediaries said that, if transport delays became too long at points of entry, then they expected some of their customers to move their supply chain away from the UK.

Traders held considerable concerns about expected delays at the UK’s ports. Although most did not anticipate changing the ports of entry used, some did suggest that they would consider moving their goods via northern ports if those in the south became excessively congested.

As with the UK’s exit under a FCA, many traders did not envisage changing the modes of transport employed to move their goods. However, some UK businesses said that they would re-evaluate the transport used if they did move their operations to a location within the EU. Furthermore, if there was a shift towards the northern ports, this may lead to a rise in the use of unaccompanied trailers.

Traders expected that a D1ND scenario would require considerable change to their customs procedures, but they were unsure of what exactly these changes would be. However, they were certain of an increase in the level of administration required, and associated costs. UK intermediaries were clearer than businesses on what this would look like, and international traders were comfortable to ‘wait and see’ what they needed to do once these changes had been decided.

Some traders felt that they may make greater use of intermediaries to help them navigate the changes to customs procedures. However, for the most part traders wanted to continue using the same intermediaries.

As with the FCA scenario, traders were unfamiliar with customs simplifications, authorisations, and procedures and were therefore not clear on anticipated changes under a D1ND.

2. Introduction

2.1 Background

This research aimed to expand HMRC’s understanding of possible changes to trader behaviour under different scenarios for the UK exit from the EU, to help the department to:

• have the appropriate resources in place

• provide the right customer support and guidance

Specifically, the department was looking to explore likely changes in behaviour under 2 different scenarios.

• scenario A: Facilitated Customs Arrangement, whereby the UK would apply the EU’s tariffs and trade policy for goods intended for the EU, and its own tariffs and trade policy for goods intended for the UK^{[footnote 2]}

• scenario B: Day 1 No Deal (D1ND) scenario, whereby existing regulations for non-EU trade could apply to all goods imported to or exported from the UK

HMRC commissioned IFF to undertake a programme of qualitative research with:

• EU-facing businesses which dealt with their own customs arrangements

• intermediaries, who managed customs on behalf of importing or exporting businesses

Intermediaries included freight forwarders, customs agents or brokers, fast parcel operators, and hauliers.

2.2 Research aims and objectives

This research sought to understand:

• current trading practices: what and how goods were moved and the factors influencing these practices

• changes to trading behaviour that traders were likely to enact under 2 possible scenarios following the UK exit from the EU

• drivers of these potential changes and what difficulties and benefits they envisaged under each scenario

2.3 Methodology and sample

Qualitative in-depth interviews were deemed to be the most appropriate methodology for achieving the research objectives.

A mix of face-to-face and telephone interviews were conducted with UK traders consisting of businesses and intermediaries. All interviews with international traders were conducted over the telephone. Interviews took place between 27 September and 9 November 2018. On average, interviews lasted 55 minutes in length.

Sample was sourced from commercial providers. Participants were screened to ensure that at least a third of their trade was between the UK and EU, type of organisation, if they were an agent, and whether or not they used an agent. We also monitored recruitment and achieved a good mix of organisations by size, sector and location.

Participants were recruited, one from each company, on the basis that they were knowledgeable enough to speak with accuracy about how they expected their company’s behaviour to change under different scenarios for the UK exit from the EU. In the case of the international interviews, recruitment proved to be challenging and only a small number of interviews were conducted.

In total, 49 qualitative interviews were conducted. Forty-one were with UK traders; 16 with businesses and 25 with intermediaries. Eight interviews were conducted with international traders: one with a business and 7 with intermediaries, which include freight forwarders, customs agents or brokers, fast parcel operators and hauliers.

Table 1: Profile of traders interviewed by type of trade

Type of trade	UK-based businesses	UK-based intermediaries	Businesses based outside UK	Intermediaries based outside UK
Majority UK-EU trade (66% to 100%)	9	15	1	5
Some UK-EU trade (33% to 66%)	7	10	0	2

Table 2: Profile of traders interviewed by type of intermediary

Type of intermediary	UK-based businesses	UK-based intermediaries	Businesses based outside UK	Intermediaries based outside UK
Freight forwarders	N/A	8	N/A	5
Customs agents or brokers	N/A	5	N/A	0
Fast parcel operators	N/A	1	N/A	0
Hauliers	N/A	11	N/A	2

Table 3: Profile of traders interviewed by whether they use an agent

Uses an agent	UK-based businesses	UK-based intermediaries	Businesses based outside UK	Intermediaries based outside UK
Yes	11	N/A	1	N/A
No	5	N/A	0	N/A

A range of UK businesses were spoken to, individuals interviewed included CEOs or managing directors, financial directors, and also logistics or operations managers. In terms of business sectors, the sample included medical prosthetic developers, and importers or distributors of raw materials, timber, fine wines, or plastic. In terms of size, nearly half of the UK businesses had between 2 to 20 employees, some had 21 to 49 employees, one had 50 to 99 employees, and some had over 100 employees. Regionally, many were based around London and the South East.

Of the 25 UK intermediaries, we interviewed staff who were at the director level for the most part, but we did also speak with some who dealt with finance, operations, or customs compliance. The majority of the intermediaries that took part had 2 to 20 employees and were based in London and the South East.

In terms of international traders, we spoke with one business and 7 intermediaries. The international intermediaries were based across a number of EU countries including Belgium, Denmark, Germany, Sweden, and Slovakia. The participants tended to be responsible for operational management, generally to do with logistics or customs clearance.

2.4 Reporting note

This report covers qualitative analysis, intended to understand individuals’ circumstances, attitudes and behaviour in depth and detail, rather than to be ‘representative’ or measure the incidence of these attitudes and behaviours. Results, therefore, show a range of opinions and give an indication of the in-depth reasons for these opinions or the individual circumstances surrounding them. The interviews achieved are not intended to be fully representative of all traders and fewer international traders were interviewed than UK-based traders.

When describing the results, terms such as ‘many’, ‘some’ or ‘a few’ are used to give a relative indication of the extent to which views were expressed or behaviours reported.

The 2 scenarios are not directly comparable and should not be interpreted as such. Under a FCA the transition period is expected to take longer, while changes under a D1ND scenario might be effective immediately.

3. Current trade

This section explores trader’s current trading practices. To fully understand how trading behaviour might change under the UK exit from the EU, it was important to first understand current trading practices including:

• key factors that influenced the way goods were moved; how goods were moved
• whether any third parties were used
• whether any customs simplifications, authorisations or procedures were used

Traders were also asked about their general sense of preparedness for the UK exit from the EU, irrespective of the presented scenarios.

3.1 Key factors influencing decisions on how to move the goods

Many businesses decided to move goods according to 3 inter-related factors: cost, timing and reliability. Additionally, efficiency or ease of pick-up or delivery was a consideration when selecting an intermediary. Intermediaries tended to specialise in a specific mode of transport and relied on being subcontracted by businesses to move their goods. Intermediaries felt that their likelihood of being subcontracted depended on their ability to provide an affordable, timely and reliable service.

3.1.1 Cost

While cost and timing were generally weighed against one another, many businesses prioritised cost-effectiveness when making decisions about how to move goods.

Businesses whose goods were not perishable or did not need to be delivered quickly were inclined to prioritise cheaper methods of moving the goods. For example, one UK business who imported raw materials into the UK noted that, as they did not operate on a just-in-time basis, they were able to bulk order materials on a monthly basis. This was more cost-effective than importing smaller amounts more frequently.

“We don’t work just-in-time on our raw materials. We just order in bulk one month at a time and that’s convenient at a discount point of view.” (UK Business, 2 to 20 Employees)

Many UK businesses that used freight forwarders, road hauliers, and fast parcel operators deferred the decisions on how their goods were moved to these intermediaries. In terms of selecting the third parties themselves, for these businesses, cost was usually the deciding factor of which agents to use.

“[Speaking on factors that determine how hauliers are selected] To be honest, price…We decide on the haulier. We have 3 or 4 that we use and they determine the route and port of exit and entry.” (UK Business, 21 to 49 Employees)

3.1.2 Timing

Traders who required goods to be moved more urgently, for example, due to perishability or customer demand, tended to prioritise timing over keeping costs low. In this case, costs were often passed on to the customer as the necessity of an expedited delivery.

“A juggling act between the cost and the time frame required … speed is usually the biggest issue.” (UK Business, 2 to 20 Employees)

“It is assumed that the [customer’s] decision is made, on one hand, the cost calculation, and, on the other hand, the transit time calculation.” (Freight Forwarder, 100+ Employees)

A small number of businesses and several intermediaries considered the speed of their delivery as critical to maintaining their reputation. One business discussed that, when exporting goods, they generally considered speed to be more important than cost as they wanted to be regarded as reliable within their supply chain. They needed to send tools quickly as their customers were often in emergency situations where replacement parts were required as soon as possible.

A small number of the UK businesses operated on a just-in-time basis. For these businesses, speed of transportation was a major influencing factor in how they decided to move goods. A key reason for operating on a just-in-time business model was to avoid stockpiling of goods and to enable greater cash flow.

“Everything is just-in-time, so speed and reputation are key.” (UK Road Haulier, 2 to 20 Employees)

3.1.3 Reputation and reliability

Having a good reputation and being viewed as reliable were important considerations for traders and intermediaries. The reputation of some businesses was dependent on their ability to deliver goods quickly and so this meant that they would opt to subcontract intermediaries who had a good reputation at delivering on time and ensuring products were delivered in a good condition. For intermediaries, it was important to establish a record of delivery on time to ensure repeat business.

“We usually try and push [a specific fast-parcel operator] on to people because their customer service is so good, but people won’t pay for [that operator] … [Other commonly known fast-parcel operators] can be a bit iffy; damage rather than loss … a fork has gone through the side of the package, or been crushed.” (UK Customs Agent, 100+ Employees)

3.1.4 Proximity, ease of pick-up and delivery

While the factors mentioned above were more key to affecting decisions around the way goods were moved, ease of pick-up or delivery was also a consideration mentioned by several traders. A handful of businesses noted that the ease of moving goods through an intermediary that is located nearby is important.

“[We] have a local [named parcel operator] depot in Reading, so [it’s] easy to drop off if necessary.” (UK Business, 2 to 20 Employees)

One UK business, with a worldwide market, had its transport organised by EU suppliers with no involvement in the way goods were moved; this was regarded as cheaper and easier. They did not manufacture enough volume to fill their own cargo load and, instead, used consolidated cargo, which required less resource or input from the business.

“We just ask the freight forwarder to turn up with a lorry, they pick it up and whatever… We don’t specify.” (UK Business, 100+ Employees)

3.2 How traders currently move their goods

While there are distinctions in the movement of goods between businesses and intermediaries and by the location of trader, many said that they moved their goods between the UK and EU via road and then sea ferry, via accompanied trailers. There are differences in the transportation methods used, the ports selected and the level of storage used by traders.

“Goods are either picked up at the point of origin, [the] producer or vendor, then transported to a warehouse facility by road. It’s onto a container then typically shipped by vessel to the destination. A small percentage of it is moved by air.” (Freight Forwarder, 100+ Employees)

3.2.1 UK businesses

UK businesses felt that the way they moved their goods was dependent on the size, durability and perishability of their goods. Most of these businesses moved goods via road and sea ferry when moving goods between the UK and EU, usually on accompanied trailer voyages.

It was uncommon to move goods via air freight unless it was for urgent cases or over long distances to rest of the world countries. For example, one business moved goods via express airfreight, for example fast parcel operators, as their clients, usually end customers, typically required the machine parts, the goods, urgently due to their machinery breaking unexpectedly.

Some businesses relied on intermediaries to decide which ports were used, particularly if they did not manufacture a sufficient volume of goods to avoid using consolidated cargo. The nature of these businesses often meant that their goods were not so readily required by customers and more time could be afforded during transportation resulting in lower costs.

There were occasionally other factors at play. One UK business explained that, while minimising costs was an important reason for sending their own driver to collect goods from the source country, within the EU, it was also a useful way of keeping a strong relationship with their supplier and also verifying the quality of the product, which was prone to damage, before accepting it.

“Cost is one. Also, if you have your own driver go there, you’ve got a relationship with your supplier, you can check the goods yourself because if somebody buys ten palettes of bricks, they’ll be fine. With timber, because we do quite fancy timbers, the quality, moisture content, the look of it, good figure on the surface. Even though the driver is super savvy, he’s getting used to the timber and he can tell when it’s all warped and twisted or badly packaged, sitting out in the rain for a week, he can give us a call and let us know.” (UK Business, 2 to 20 employees)

Most businesses that we spoke to did not already use warehousing at or near the ports. Goods tend to be moved quickly through the ports and therefore many businesses did not see the need to stockpile goods near the ports. Storage was less of a concern for businesses who worked to a just-in-time system as stockpiling did not suit their commercial needs.

3.2.2 UK intermediaries

Many UK intermediaries moved goods within the UK-EU by road and sea ferry. Goods from or intended for countries outside the EU tended to be moved by sea and road, coming and leaving from Felixstowe, Southampton, or Dover.

Due to volume and logistics, the transport that some freight forwarders or road hauliers used was specific to the type of goods moved. For example, a UK intermediary had no alternative to using sea freight. As a sea freight specific company, the business largely transported large volumes of bulk materials, such as minerals or fertiliser, as this was the most cost-efficient method. This limited the changes that such intermediaries could make to the way they moved goods under any EU exit scenario.

For UK intermediaries, regarding goods moving between the UK and EU, Dover tended to be used the most often as the port of entry or exit to and from Calais, particularly for goods being moved via road haulage. Other ports commonly mentioned included Felixstowe and Southampton.

3.2.3 International traders

International traders tended to also move goods using the road and sea but they were a little more inclined to use a mix of road and rail haulage as well.

One international trader, which imported and distributed fruit, selected ports according to proximity to customers and sometimes used smaller ships or barges to get closer depending on ports.

“All come from countries of origin by ship and get to the closest port they can to the customers.” (Intermediary business, 100+ Employees)

3.3 Use of third parties

Many traders had used some form of transport third party to move goods, with freight forwarders and road haulage being preferred options for both businesses and intermediaries.

A smaller number of traders noted that they had used customs agents for trade that was with non-EU countries. A few UK businesses reported they had used a bonded warehouse and air freight companies. Of the UK intermediaries that participated in this research, only a few had carried out road haulage, freight forwarding, and customs brokering for other intermediaries.

3.4 Use of customs simplifications, authorisations or procedures

Typically, traders were unfamiliar with customs simplifications, authorisations or procedures and unsure how useful these could be to their trade.

For many UK businesses, customs procedures were carried out by third parties and, as a result, they had limited knowledge of what customs simplifications, authorisations and procedures are or whether their intermediary might use them on their behalf. A few businesses who traded solely within the EU said they had no current need for such procedures and were not interested under current trading conditions. Although very few businesses had actually used any special customs procedures, those who had used special customs procedures mentioned the following: Authorised Economic Operator Status (AEOs), duty deferment scheme, Generalised System of Preferences (GSP)^{[footnote 3]}.

Those who also traded with the rest of the world had greater awareness of customs simplifications, authorisations and procedures.

Despite the confidence from UK businesses that UK intermediaries would know more about such procedures, UK intermediaries also had little knowledge of customs simplifications, authorisations or procedures. Many intermediaries did not perceive such procedures as providing any benefit to their current UK-EU trade. In the few cases where UK intermediaries that we spoke to had used customs procedures, these tended to have been subcontracted out to other third parties, for example freight forwarders, or the business who commissioned their services would arrange it.

A few of the international traders had used customs simplifications, authorisations or procedures when trading with rest of the world countries. However, as with UK intermediaries, many of the international traders that we spoke to who had used customs procedures said that these tended to be dealt with by other third-party intermediaries or the commissioning business. One international trader, the Belgian division of a road haulage company, reported that they were working towards AEO status in preparation for EU exit.

One international trader with experience using a range of customs simplifications felt more inclined to choose simplifications that sped up customs clearance and provided an advantage over competing intermediaries. Another international road haulier reported that while they weren’t applying for customs simplifications, authorisations or procedures they had started the application process to attain AEO status in preparation for the UK’s exit from the EU.

“We would always use the simplified customs process wherever the commodity for the cargo allows us.” (Freight Forwarder, 100+ Employees)

3.5 General level of preparedness for the UK exit from the EU

This section explores traders’ general feelings of preparedness and whether they had taken any actions to prepare for the UK exit from the EU. It illustrates themes that came through when thinking about the UK exit from the EU in general, for example, not specific to either of the presented scenarios, but also themes that were repeated when thinking about the UK exit from the EU under the FCA or D1ND scenarios.

3.5.1 Traders unsure and uncertain

Many traders felt unsure and unprepared for the UK exit from the EU. There was a sense of frustration as they wanted to plan, but they did not feel they had enough information to do so effectively. They were unwilling to use resources preparing without a reliable picture of what will happen in March. This was a particular concern for smaller businesses with less resources.

“We have no idea what to prepare for. I think about it every day, but I don’t know how the outcome’s going to go. It’s a cliff edge, we walk away with ‘No Deal’, then our customers, who are the importers and exporters, are going to be faced with severe challenges… tariffs and quotas very possibly.” (UK Freight Forwarder, 2 to 20 Employees)

“It is difficult and expensive to prepare for something that you are not sure is going to happen… We have tried to prepare ourselves, but we keep asking, ‘What is it [that] we are preparing for?” (UK Road Haulier, 100+ Employees)

“What is very important for us in business and logistics industries is to have as quick as possible clarity. Because preparation [right now] is like an Emmental cheese, you have hole-to-hole-to-hole where you don’t know the answers.” (International Road Haulier, 100+ Employees)

3.5.2 ‘All in the same boat’

Despite the uncertainty surrounding the UK exit from the EU, some traders took comfort in acknowledging that at least everyone would be in the same position. They felt that everyone was equally disadvantaged. This led some participants to believe that there would be no competitive edge for anyone. They also believed that no EU exit plan could be enacted straight away as there would need to be time for changes to embed. Traders felt that, when the time came, they would need to be provided with time to understand and adjust to any new trading regulations.

“[Discussing increases in transport costs] Well actually that all applies to everyone, doesn’t it?” (UK Business, 2 to 20 Employees)

3.5.3 Hiatus period: delays at the ports

All traders expected that, when the UK leaves the EU, there will be an initial period of disruption to customs procedures. Specifically, they expected delays at the ports as traders and customs officers become familiar with the new trading regulations. Traders expected that this would be the case even if the eventual scenario requires only minimal changes to their current trading behaviour. In line with this, several traders anticipated that there may be an increase in stockpiling of goods, but they thought there was not sufficient warehousing in the UK to account for a large increase in stockpiling.

3.5.4 Devaluation of Sterling

Many traders were concerned about a possible initial devaluation to Sterling and subsequent damage to their trade. They felt that under any outcome this was likely to occur at least initially. A few traders noted that this devaluation could be more of a risk to their business than the expected delays at the ports.

“Devaluation of Sterling is actually almost more frightening as an indirect result than the implications of customs delays.” (UK Business, 2 to 20 Employees)

3.5.5 Disjuncture between businesses and intermediaries

There was disjuncture between businesses and intermediaries, where each expected they would follow advice or directions from the other. Intermediaries felt reliant on business decisions to inform their own decision making. Whereas businesses said they were waiting for advice from their intermediaries to know how to respond to new trading regulations when the UK exits the EU.

“Clients have no idea what to do. Some are opening warehousing in Europe or are going to warehousing in Europe, diverting traffic straight into Europe to avoid problems. Means we will lose business.” (UK Customs Agent, 2 to 20 Employees)

A few agents mentioned needing to increase their staff to ensure they could cope with expected increases in administrative burden related to their current workload as more businesses seek additional advisory support, rather than because they expected an increase in demand for their services. There is some suggestion that intermediaries expected other intermediaries in the trading process to take on the advisory role or take on the responsibility of any increased workload. Many intermediaries were not the sole intermediaries involved in the trading process. They and their clients often used or worked with a number of intermediaries. It is possible that splitting the trading process among several intermediaries has diffused any sense of responsibility to advise their clients.

3.5.6 Small and large traders seem equally prepared

There was a perception that larger traders with more employees are better prepared than smaller traders to deal with the UK exit from the EU. However larger traders tended to not report feeling any more prepared than their smaller counterparts.

The proportion of UK-EU trade did not seem to impact on trader’s preparedness. There did not appear to be any clear differences in preparations or expected changes to behaviour between traders who mostly trade between the UK and the EU and those for whom UK-EU trade only makes up a small proportion of their overall trade.

3.5.7 UK businesses expect to continue to trade with EU

Most UK businesses expected that trade with the EU would remain viable, irrespective of the EU exit outcome. There was a general feeling among UK businesses that they would adapt to the changes in order to continue operating, and for some businesses that included measures such as moving some of their operations within the EU, raising their prices and factoring in more time for administrative processes relating to any new customs procedures.

This research found little evidence to suggest that UK traders would source products from within the UK rather than importing from the EU or internationally. Many businesses reported that they would continue to import from their existing sources with several mentioning that they cannot source particular components for their products from within the UK market. These traders acknowledged that any change to trade between the UK and the EU is likely lead them to put up their prices in order to mitigate an increase in business costs.

4. Facilitated Customs Arrangement

Participants were presented with a description of the FCA, and were then asked a range of questions about how they might change their trading behaviour under a FCA scenario. The FCA is outlined in the Government’s paper on ‘The future relationship between the United Kingdom and the EU’^{[footnote 4]}.

4.1 Preparedness under FCA

There was a distinction in traders’ views between how prepared they felt under a FCA scenario in the immediate term, and how their trading behaviour might change in the long term. While traders typically expected some disruption and initial changes to their trading behaviour, they did not expect these initial changes to be sustained. In the long-term they expected their trading to be very similar to the current situation.

Many traders felt uncertain about the details of what would be required of them under a FCA scenario, and consequently they did not feel fully prepared. No traders reporting to have taken any tangible steps to prepare for a FCA scenario. Despite this lack of preparedness, traders expressed a degree of confidence that they would ‘think on their feet’ to adapt to the new trade procedures and requirements that the FCA would bring. This sentiment perception was caveated by the rationale that they expected most changes they need to make to be temporary as everyone adjusts to a new system. This is to say that they perceived that, in the long-term, the changes they would make would not be drastically different to their current trading practices and so there would not be too much that they would need to prepare for.

Overall, there were no clear differences in expected trading behaviour or preparedness between traders who traded the majority of their goods with the EU and those who traded some of their goods with the EU. Although ‘majority’ traders appeared more concerned about a FCA scenario and the UK exit from the EU more generally, their lack of planning and inaction was similar to those who only traded some of their goods with the EU.

4.1.1 Immediate-term

In the immediate-term, traders expected there to be an initial adjustment period with some disruption to their delivery timelines.

“An equilibrium will be restored after 6 months, 3 months, but if we carry on in the way we are … it will be utter chaos. People won’t know what they are meant to be doing.” (UK Freight Forwarder or Haulier, 100+ Employees)

Traders most commonly mentioned that they expected delays at ports and an increase in costs related to administration. For example, one UK intermediary specialising in car transportation to the EU anticipated that there may be additional administration procedures at ports, for example Dover’s ‘roll on-roll-off’ ferry. This intermediary anticipated this to have a two-fold impact on their business. Firstly, it would increase the time the driver is required to spend at the port and therefore the time taken for the goods to reach its destination. Secondly, the intermediary expected it to lead to an increase in staff costs, as the driver will be required to spend more time on each job.

“We don’t do anything in terms of customs, but if there is a physical stop, a physical border, and a customs process then I am guessing we will have to do some administration that we don’t do today. The other thing is time, if our drivers will be restricted, then that is a major concern for us because the driver is quite a large part of the cost of the business. So, the driver spending a large part of his time sitting at the port instead of driving will cost us a lot of money.” (UK Road Haulier, 100+ Employees)

Traders expected that any additional costs would be passed on to the customer, and UK intermediaries expressed this sentiment with more certainty than businesses. UK businesses were concerned about remaining competitive against European businesses and considered that they may need to absorb additional transportation costs into their profit margins.

Despite the anticipation of some short-term disruption, traders expected the transition period to be more gradual under the FCA and found this to be comforting. They thought it suggested that there would be understanding and more leniency from HMRC while all traders adapt to the new requirements. This was particularly the case for freight forwarders.

4.1.2 Long-term

Traders perceived that, in the long-term, trading under a FCA would be similar to their current trade practices and they would not need to make too many changes to their trading behaviour. After the initial period of disruption, many traders did not expect to experience any major ongoing negative impacts to their business.

“This scenario [FCA] is easier to deal with. Just have to understand the interfaces, rules, speed etc. It might take a couple of weeks to settle, but then it should fly.” (UK Business, 100+ Employees)

Despite this view, a small number of traders considered actions they might need to take in the longer-term under the FCA. For example, one UK business specialising in the manufacture of horticultural equipment mentioned that they might need to move some of their operations into the EU so that they are within the EU trading bloc. However, this trader noted that this would be dependent on whether it was cost-effective to do so, whether there were any additional tax regulations, and the ease of moving goods across Europe.

As mentioned in the ‘Current trade’ section of this report, traders had a range of views and expectations towards the UK exit from the EU that remain consistent regardless of the way that the UK will leave the EU. For more information please see section 3.31.

4.2 Changes to markets

Traders did not expect to see a difference in the markets that they trade with under a FCA. Most traders expected to continue trading with their current clients and markets, and any change here was not likely to be resulting from the FCA. One UK freight forwarder considered that if the new UK tariffs were low enough they could experience an increase in customer demand for their business.

“Generally, there would be no difference here. Trade would continue more or less unchanged. We would do tariffs reciprocally and that is no bad thing. If UK tariffs were actually lower, there could be a benefit to leaving, [it] could increase business.” (UK Freight Forwarder, 50 to 99 Employees)

There was some minor concern about increased costs due to anticipated additional customs paperwork and the application of tariffs. However, intermediaries and businesses tended to expect to pass these costs on to the customer and did not expect this to have an impact on their trading markets or current clients.

“Because it’s not big numbers, I’m not sure this is changing a lot from our side … if the customer wants to get it faster, we would apply the additional cost.” (Intermediary business, 2 to 20 Employees)

4.3 Changes to volume and frequency of trade

In the long-term, traders did not anticipate much change to the volume or frequency of goods that they will trade or move under a FCA. There was a general feeling that following the initial period of disruption, trade would return to ‘business as usual’.

Some UK and international intermediaries expected that in the short-term there would be an initial decrease in the volume and frequency of goods moved. This was due to anticipated delays at ports while businesses and customs agents adjust to the new procedures and requirements. For intermediaries transporting time-critical goods, these anticipated delays were expected to have a negative impact in the short-term.

“It is highly contingent on the level of administration required, because if there are any trade barriers or the slightest increase in waiting times, the food loses value by the hour and exporters may decide not to sell.” (Haulier, 100+ Employees)

As a result of the anticipated delays, some traders expected that, in the short-term, there may be an increase in stockpiling goods in warehouses to ensure that businesses can deliver products on time in case their goods are caught up in the expected delays at ports. Some businesses anticipated that they would opt to move larger quantities of goods less frequently, in the short-term until the administration at the ports has been smoothed out.

“Could maybe see some delays in deliveries, like some extra checks at UK borders [Stansted]. In theory, it shouldn’t make a big difference unless we have a big demand for next day deliveries.” (UK Business, 2 to 20 Employees)

4.4 Changes to ports of entry

Both UK and international traders tended to not expect any change to their ports of entry under a FCA. Ports of entry were seen as fixed, and chosen due to location of business or intermediary, cost of transporting, and time required to move the goods.

“No, because there are no other options. The geography is the geography and the timing is the timing. For our product there is no chance.” (Haulier, 100+ Employees)

Although traders anticipated initial delays at the ports due to additional paperwork and time needed for clearing customs, only a very small number of UK intermediaries considered changing their ports of entries because of these delays. Some intermediaries had flagged that there would be an increased need for storage at the popular ports such as Dover during the transition period and that customs processes would be slower.

In one instance, a UK intermediary anticipated that the delays at Calais and Dover might lead them to change their ports of entry to Felixstowe or Ramsgate which they expected might face less disruption.

“Possibly ports of entry might change. I think Calais and Dover will become bottlenecks…we might change routes to use Felixstowe-Zebrugge for deliveries in Holland and Belgium. The crossing takes longer, 4.5 hours, but the waiting at ports might be less. Deliveries to France will still have to be either Dover to Calais or Dover to Dunkirk, or using possibly Ramsgate.” (UK Haulier, 21 to 49 Employees)

4.5 Changes to modes of transport

As with ports, traders viewed their modes of transport as relatively fixed and were chosen in terms of suitability to the job, cost effectiveness and time efficiency. Decisions to move goods through alternative methods were often restricted by the nature of the goods, for example in terms of weight, size and perishability. Although many traders expected initial delays at ports they did not expect changes to their chosen modes of transport.

Intermediaries’ mode of transport tended to be their business model, for example road haulage or shipping and so they felt unable to change their mode of transport.

“Shipping is what we do. That won’t change … but we might find we are unviable.” (UK Freight Forwarder, 2 to 20 Employees)

A very small number of intermediaries suggested that the initial increased levels of congestion at ports might lead to a resurgence in the use of unaccompanied trailers, whereby a trailer is loaded onto a ferry, and then is met by a lorry that delivers it to the destination. This view was not widely held and was thought to be a more likely outcome under a scenario that requires more changes to customs procedures.

“More [goods] will come via old-fashioned unaccompanied ports.” (Haulier or Freight Forwarder, 50 to 99 Employees)

4.6 Changes to customs procedures

The FCA specifies that traders will need to provide evidence of the final destination of goods to determine which tariff they are expected to pay when moving goods through the UK; whether they pay the tariff for goods landing in the UK, EU or a non-EU country. The burden of needing to prove the final destination of the goods was a key concern for most traders under the FCA scenario, although intermediaries expressed a greater level of concern than businesses.

Many businesses felt that they could provide evidence of the journey and destination of their goods. A few businesses expressed confidence with their current ability to track their goods and did not think they would need to make any significant changes to their current business model to be able to meet the new requirements under a FCA. These confident businesses tended to be those who were legally required to keep detailed records of their products, for example those trading medical-grade goods.

“It’s our product. We can trace everything back to the original in manufacture. Because of strict medical rules we have to have traceability of everything. With the delivery notes, we get certificates of conformance, irradiation, origin of materials, such as BSI certificated [British Standards Institution certificated] and EC certificated [European Community certificated]. All our systems very tightly controlled.” (UK Business, 2 to 20 Employees)

However, some businesses reported that the ability to trace the final destination of goods was limited by the nature of the goods they trade. They said that such a requirement could negatively impinge on traders who move parts of a product or products, such as soil, which are not easily traceable. As demonstrated in the quote below, the key concern was when the burden of proof would end for traders of parts or difficult to trace goods.

“If you buy a spare part, a hose, from America, import it into the UK then send it to Holland to go onto a barge, it’s then part of an ROV [vehicle]. So you have lost control [of the product journey] because it is no longer an item, it’s part of a bigger thing. It has vanished.” (UK Business, 100+ Employees)

Compared with businesses, intermediaries were less confident in their ability to prove the final destination of the goods they are moving. Intermediaries reported that the information required under a FCA is not currently fed to them by clients or recorded by them. There was a general feeling from intermediaries that the destination of goods was ‘not their concern’ and, therefore, this information gathering was not currently built into their business practices. Under a FCA, they felt they would need to chase their clients to provide them with evidence of the end destination of the goods and this would have time and resource implications for the intermediary.

“At no point do we take ownership of the goods, we transport them. The vendor or customer will deal with the good.” (UK Haulier, 2 to 20 Employees)

Following this, intermediaries considered that such a requirement forced them to rely on the honesty of their clients and the information they pass on. This was of particular concern for freight forwarders and fast parcel operators.

“But if someone tells a downright lie, what can I do…? Are we to be held responsible?” (UK Freight Forwarder, 2 to 20 Employees)

Traders had mixed views as to whether their current IT systems would be able to track and trace the journey of the goods they move. Some businesses and many intermediaries felt unprepared and said that the need to report the final destination of the goods they move would result in a need to upgrade their current computer software. Road hauliers expressed particular concern as they said they considered that their computer systems were rudimentary compared with intermediaries who have to cross official custom borders daily. For traders who felt their current IT systems would be insufficient, this had the potential to significantly increase their business costs.

“We will need to implement inventory controls to tracks goods. It also depends on what type of goods, if the requirement is for particular pieces to be identified then it’s going to be an enormous challenge. The biggest problem would be that you’re implementing the same controls as a customs bonded warehouse for goods which are effectively in free circulation.” (Agent (across all modes), 100+ Employees)

One UK business expected that they could continue to use the HMRC Intrastat online portal for tracking the movement of goods. They thought that this would be sufficient for the requirements under a FCA and therefore they could avoid needing to update their own IT systems.

Intermediaries with large numbers of employees and road hauliers were particularly alert to the need to upskill their staff on any changes to their customs procedures under a FCA. They typically envisaged that the training would be done internally and saw this as an expense that they would need to cover from their profit margins.

“Been talking to CEO about getting training on customs.” (UK Business, 2 to 20 Employees)

“None of our EU road operations staff or sales staff are trained in customs. We will need to train 15,000 staff in this. 1,000s of customers who only trade within the EU will need to understand valuations and provide documentation.” (Agent (across all modes), 100+ Employees)

Some traders noted that the new requirement of proving the final destination of the goods under the FCA would result in additional paper work and they may need to hire more staff to deal with this. Among intermediaries and businesses, hiring staff internally was prioritised over increasing their use of customs agents. Larger intermediaries were more inclined than smaller intermediaries or businesses to identify the need to upskill their staff on customs procedures following any UK exit from the EU scenario.

“We would have to go into more detail finding out where our suppliers are from and demonstrating there is the required percentage, so it’s more of an administrative burden. It’s not difficult, it’s just time-consuming.” (UK Business, 100+ Employees)

“None [no formal training] used at the moment, but I have been talking to the CEO about getting training on Customs.” (UK Business, 2 to 20 Employees)

One international trader anticipated that they would need to provide 24-hour staff coverage within their office to meet an anticipated increase in customs procedures. As a result of this, they expected to take on more staff which would also result in increased costs.

“It will have an impact on our people in the office, we will need more people…it will be 24 hours’ work…It’s still not clear what the impact will be, [currently] we have normal office hours.” (Haulier, 100+ Employees)

4.7 Changes to use of intermediaries

Many traders felt that the demand for intermediaries was unlikely to change under a FCA. However there were some nuances to this view as a small number of traders thought they might seek advice initially, to help them navigate the changes, and others expected that in the short term their need for intermediaries who can deal with stockpiling and warehousing may increase.

It was not a widespread view, but some traders thought that with the changes to customs procedures under the FCA they might seek advice from HMRC and customs agents on how best to trade under the new conditions. These traders acknowledged that their additional use of intermediaries would only be in the short-term as they sought assurance that they were compliant under the FCA.

“We could potentially end up using the customs brokers up to 120 times a week compared 10 times a week.” (UK Freight Forwarder, 50 to 99 Employees )

Traders considered that the anticipated increase in stockpiling, due to expected initial delays at ports, may increase the demand for warehousing, particularly close to ports. Dover in particular was mentioned as needing a great deal more warehousing space and consequently the intermediaries who look after the warehoused goods.

“We always warehouse in close proximity to ports to keep costs down – biggest expense is haulage.” (UK Customs Agent, 2 to 20 Employees)

4.8 Changes to supply chain

As with trading markets, most traders did not expect to see a difference within their supply chain under the FCA. For businesses, suppliers were seen as contributing to the overall quality of their end product, consequently they expected to maintain these relationships. For intermediaries, they anticipated that they would largely retain the same clients and use the same ports of entry so they did not envisage much change to their current supply chain.

“We wouldn’t change our suppliers because there aren’t suppliers in the UK that we could use that are of a sufficient quality. All of our raw materials have been approved by our customer [automobile manufacturers] and it would be very expensive for both us and them to go through a change and approvals for another user. There isn’t anyone in the UK that we are aware of that has goods that would pass the various tests that they would have to go through.” (UK Business, 2 to 20 Employees)

4.9 Changes to customs simplifications, authorisations and procedures

Traders wanted more clarity around how customs simplifications, authorisations and procedures would assist with trade under a FCA. Under current trading regulations traders tend to not need simplifications, authorisations or procedures when moving goods between the UK and the EU and so many traders were not aware of what these special procedures might mean for them under a FCA.

Compared to intermediaries, businesses tended to report low levels of both awareness and involvement in such procedures. Businesses tended to think that if customs simplifications, authorisations and procedures were to be useful, then their intermediary would inform them of this and assist with the application process.

“We would continue to do everything through freight forwarders.” (UK Business, 50 to 99 Employees)

Many intermediaries reported greater familiarity with customs simplifications, authorisations and procedures than businesses yet they still felt uncertain and unprepared for any changes to these processes under the FCA. One UK haulier was concerned whether they would be able to obtain a sufficient number of vehicle permits to transport goods to or within the EU and there was a fear that they might miss out in favour of the larger haulage companies.

“At the moment we don’t need any authorisation for customs. All our vehicles carry the ‘European Community’ permit at the moment. We have an operator’s license for up to 50 vehicles so they get 50 of these permits. Once we are out of the EU, we will have to apply for the ECMT permit (European Conference of Ministers of Transport) to replace these. So, there may be a problem just getting across the borders if we don’t have these. My concern is that the big boys [large haulage companies] will get many of these permits and we will only get a few. This would mean we would have to downsize vehicles and drivers if we cannot drive across to Europe as we won’t have enough permits.” (UK Haulier, 100+ Employees)

A few traders considered the role of Authorised Economic Operator (AEO) status and how it may impact trade processes under the FCA. There were mixed views as to how AEO status would assist and most traders had not given much thought towards AEO status or taken action towards applying for an AEO status. However, a couple of intermediaries saw AEO status as the key to being prepared for trade under a FCA and expected the demand for the limited supply of AEO statuses will increase significantly.

“We’ve considered AEO status as the media has reported such businesses would be given preference after the EU exit. We have not investigated it yet as we’re unsure of what will happen.” (UK Freight Forwarder, 2 to 20 Employees)

“The challenge is that there are relatively few companies in the UK with AEO status.” (Agent (across all modes), 100+ Employees)

5. Day 1 No Deal exit

Participants were presented with a description of the D1ND, based on the guidance published on the GOV.UK website at the time, and were then asked a range of questions about how they might change their trading behaviour under a D1ND scenario.

5.1 Preparedness under D1ND

Traders did not feel fully prepared for a D1ND scenario and said they felt less prepared for a D1ND scenario than they do under exit options with longer transition periods that require fewer changes to current custom procedures. This was the case across all subsets of traders interviewed.

The topic of the UK’s exit from the EU is top of mind for traders, and they were concerned with how much change their businesses would need to undertake in a D1ND scenario. However, very few had taken tangible steps in anticipation of such a scenario as many were worried that preparing now may be an expensive and redundant exercise.

“The government hasn’t released enough information for us to really understand what we’re doing or how we go about beginning to do things.” (UK Freight Forwarder, 100+ Employees)

Perhaps unsurprisingly, traders who do the majority of their trade between the EU and the UK appeared slightly more concerned than traders whose EU-UK trade only made up a small proportion of their overall trade.

Traders who traded niche goods were less concerned about their lack of preparedness under a D1ND scenario than traders exporting and importing more generic goods. Traders manufacturing or moving niche goods felt more protected against the increased competition from EU competitors that traders anticipated as their transportation costs increase. Traders of more generic goods, on the other hand, felt exposed by the increased costs and some questioned their ability to draw the same demand for their products as they felt that European competitors could undercut them. There was some indication that smaller businesses and intermediaries also felt more exposed than larger business and intermediaries, who they presumed had larger profit margins and could absorb an increase in transportation costs.

“[Increases in costs and customs processes] may make customers less willing to purchase from UK.. they just don’t need this hassle.” (UK Business, 2 to 20 Employees)

“It’s a concern because I might lose customers if they lose business in the EU because of taxes and tariffs.” (UK Freight Forwarder, 2 to 20 Employees)

Intermediaries felt that they were less able to prepare than businesses as their own changes were reliant on the decisions and changes in demands of their clients. They were waiting to see how their clients respond under a D1ND scenario in order to know if their services will still be in demand or not.

This view conflicted with the view typically held by UK businesses and suggests a possible lack of communication between the 2 groups. Many UK businesses said they were waiting for their intermediaries to advise them on how best to change the way they move goods once the UK has left the EU.

“We trust our agents now and we would stick with those. We would look for them to do more of the admin. They are the guys that have that expertise. We are not big enough to have that kind of department or knowledge internally.” (UK Business, 21 to 49 Employees)

“Ultimately the client decides if it is going to cost him too much to bring those goods into the UK. We just facilitate and bring the goods in. If a tariff rate is applied that is going to put 20% on his goods, then they may not bring them into the UK.” (UK Customs Agent, 2 to 20 Employees)

Smaller UK businesses tended to presume that they were less prepared for a D1ND scenario than larger businesses. While a handful of larger businesses had begun to think through possible outcomes for their business under a D1ND scenario, when this research was conducted, no action had been taken and larger businesses did not appear to be significantly more prepared than smaller businesses.

A key theme that came through under the D1ND scenario was the notion that those traders who could avoid the UK would do so. For businesses, this could include moving manufacturing sites from the UK to Europe, and for intermediaries it was about bypassing the UK if it was not the final destination for the goods. While several traders talked about these actions as possible reactions they might have under a D1ND scenario, only a few intermediaries reported that they had noticed that some of their clients were physically gearing up for the move.

“Clients have no idea what to do. Some are opening warehousing in Europe or are going to warehousing in Europe, diverting traffic straight into Europe to avoid problems.” (UK Customs Agent, 100+ Employees)

A very small number of international traders, who also traded with the rest of the world, voiced a different view. They said that they preferred a D1ND scenario compared to ‘softer’ UK exit options. They perceived the D1ND scenario as providing a situation similar to their current rest of the world trade. These international traders felt that they already have the systems in place ready to deal with this style of trade, which would make the shift quite simple. In comparison, a softer exit option would require more changes to be made to their existing systems. One international trader saw the D1ND scenario as providing a business opportunity for them. They felt that they might have a competitive edge as they are used to doing trade under similar conditions with the rest of the world, and so they might be able to capture more of the UK-EU market as UK businesses and intermediaries are not prepared for this change.

“For us, the easier way is the ‘No Deal’. If we have to apply a certain amount on goods and so on, it might be more difficult because we are not used to it every time … the standard export or import procedure [of D1ND] would be more easy.” (Intermediary Business, 2 to 20 Employees)

As mentioned in the general preparedness for the EU exit section of this report (see 3.31), traders had certain expectations and views towards the UK exit from the EU that are independent of the way that the UK will leave the EU. These themes were also expressed under the D1ND scenario, and often felt more strongly than under alternative and more transitional exit scenarios.

5.2 Changes to markets

Traders expected the UK market to contract under a D1ND scenario as manufacturers move offshore and intermediaries move their trade routes to avoid the UK where possible. However, there were some nuances in how they expected this to happen - between businesses and intermediaries and by the location of the trader.

The views of UK businesses towards how their markets might change depended on the strength of their European competitors, whether their goods were sufficiently niche, and whether their profit margins were large enough to withstand an increase in competition without changing their current business model. Larger businesses who were able to re-locate to Europe and avoid an increase in transportation costs were seriously contemplating this option, but very few had taken any action towards this yet. A small number of UK businesses expressed concern that international competitors were using ‘scaremongering’ tactics, claiming that under the UK exit from the EU they will not be able to deliver on time or to cost, ultimately trying to poach their current customers.

“Our costs will increase because we’d have to ensure we did customs. We can’t pass the costs on to any customers, so any duty comes off our bottom line.” (UK Business, 100+ Employees)

UK intermediaries said that changes to their markets are reliant on how their clients respond. If a large proportion moves their manufacturing offshore, then their UK market will shrink. However, most thought that, regardless of their clients’ changes, there will still be exports and imports coming through the UK and EU and so they expected that their markets would remain the same but the scale of them might change. They felt that they would just need to comply with whatever the new regulations are under a D1ND scenario.

“The onus of the majority is on the client – we will be affected one way or another. If the client decides to send into Europe then we will go down – knock on effect across services – dramatic effect.” (UK Customs Agent, 2 to 20 Employees)

International traders did not envisage much change to their markets. Like UK traders they expected the UK market to decrease. However there were some dissenting views. One international trader thought that the D1ND scenario could lead to more internal trade within the UK; this may enlarge the market within the UK, but it would have a negative impact on their own trade. However, another saw the D1ND scenario as providing an opportunity for their market to increase. They considered that their experience dealing with rest of the world trade would better position them under a D1ND to move goods between the UK and the EU and they could take customers from unprepared traders who cannot adapt to the new trading conditions quickly enough.

“There are a lot of people operating right now who wouldn’t have the knowledge and experience [of doing trade with the rest of the world]. And I assume the fines for not getting it [the customs procedures] right would frighten people and a lot would pull out of the market, and it would be a possibility for people with knowledge from other markets [to enter]”. (Freight Forwarder, 100+ Employees)

5.3 Changes to volume and frequency of trade

Traders expected to run larger and less frequent shipments, although the rationale behind this expected change varied by type of trader and their location. The varied reasons for moving towards larger and less frequent shipments are specified below.

Many UK businesses anticipated that the customs tariffs would be flat. Based on this presumption, they anticipated that they would respond by moving larger volumes less frequently to avoid overpaying customs fees. UK businesses realised that this change in behaviour would result in more stockpiling of their goods and ultimately their need for more warehousing.

“[We] will do more bigger bulk orders to ensure enough stock and hope that may reduce customs charges.” (UK Business, 2 to 20 Employees)

UK intermediaries seemed the most adamant out of the traders that businesses would ship larger volumes less frequently under a D1ND. There was some discussion amongst UK intermediaries that moving goods via unaccompanied trailers may assist with moving larger volumes (discussed further under changes to mode of transport section). Compared with other traders, UK intermediaries tended to express greater levels of concern about the impact of delays at ports such as Dover. The expected delays were a key concern for UK intermediaries under a D1ND scenario. Some intermediaries had already noticed an increase in stockpiling and warehousing as their clients prepared for expected delays at the ports.

International traders’ views tended to be aligned with UK intermediaries. They were concerned about the lack of warehousing available at UK ports and thought goods may be stored offshore.

Within each subset of trader, there was at least one participant who had an alternative view. These few traders considered that, due to increases in costs which will ultimately be passed onto the customer, UK businesses are likely to experience a decrease in demand of their goods and consequently they will decrease the volume or frequency of their shipments. The UK business who raised this concern did not specify whether their anticipated decrease in demand would result in just lower volumes moved or extended gaps between shipments as well. An international trader suggested that the decrease in demand on imports from the EU might lead to more internal trade within the UK.

“Volumes we do would drop. Depending on at what levels tariffs are set UK goods might become uncompetitive compared with EU and we would have higher overheads on employing an in house or third-party customs agents.” (UK Freight Forwarder, 2 to 20 Employees)

“Reduction in trade volumes as Europe would be less used by UK producers, or retailers - and they might start importing cargo from other regions into the UK.” (Freight Forwarder, 100+ Employees)

5.4 Changes to ports of entry

Under a D1ND scenario, many traders expected to continue using the same ports of entry despite expected increases in congestion and severe delays to popular southern ports such as Dover, under a D1ND scenario. Only some UK intermediaries anticipated an increase in the use of the northern ports. Contractual obligations to use particular ports did not appear to be top of mind for traders, as none mentioned that contracts were the reason for wanting to continue using the same port. There was some indication that UK intermediaries were more likely than their clients (UK businesses) to make decisions about ports of entry and trade routes. A few UK businesses acknowledged that under a D1ND scenario, their transport routes and ports of entry will be ‘determined by others’, for example, hauliers and their suppliers.

“All the routes and players will remain the same, but costs and timescales will change.” (UK Business, 2 to 20 Employees)

For the most part, UK businesses expected to use the same ports unless their place of manufacturing changed or their intermediaries such as the freight forwarders they subcontract suggested alternative and more economical routes. They were not proactively looking for alternative ports of entry. For UK businesses, their key concern was that the anticipated delays at their current ports of entry would tie up their cash flow and the capital of the business.

“The customer’s not going to pay the balance until we deliver it. If it’s stuck for another week [at port], clearing, then that’s another week that we’re out £20,000, which we could’ve done something with. So, we will need to have more cash tied up. It’s reduced capital effectively, and we’ll need to commit more [capital] to sustain our business model.” (UK Business, 2 to 20 Employees)

UK intermediaries tended to have given more consideration than UK businesses to using alternative ports. UK intermediaries had heightened levels of concern about the capacity of southern ports like Dover and Folkestone to handle delays due to more complicated customs clearance procedures. Many UK intermediaries had weighed up the pros and cons of using the northern ports. While they expected northern ports to have fewer delays the ports were further away from their final destination in the UK. While most hoped to continue using the same ports, some thought that they might prefer to use those in the north of England. Irrespective of which port they planned to use under a D1ND, UK intermediaries expected to be able to pass on the increase to their transportation costs to their clients. There were no clear differences between types of intermediaries and their preference of port.

“The problem for us is the further we go the more it costs. We want to use Dover because it’s ‘next door’. With all of these things we would have to renegotiate with the customer because we would lose money immediately.” (UK Haulier, 100+ Employees)

“Northern ports will get more business to get away from the crowded south.” (UK Freight Forwarder, 2 to 20 Employees)

International traders did not expect any major changes to their ports of entry. As with UK traders, they were concerned about the congestion at the ports they use but, unlike UK intermediaries, most were not considering changing their port of entry because of this. Instead they expected to factor in time delays and additional costs for transporting in and out of the UK to their quotes.

“From the experience I have, it will be chaos, longer transit times and increased costs.” (Freight Forwarder, 100+ Employees)

5.5 Changes to modes of transport

Overall, traders did not anticipate changes to the modes of transport that they use. Traders agreed that the way goods are moved is relatively fixed. As discussed in paragraph 4.13 the size, weight and perishability of the goods all influence how businesses elect to move goods and this is not expected to change under a D1ND scenario. UK intermediaries said their modes of transport that they can offer to clients are static and they do not expect to be able to diversify these quickly under a D1ND scenario.

“Cannot change methods. We have to use ships, trucks etcetera because of volume and logistics.” (UK Business, 100+ Employees)

There were nuances to this view as UK businesses and intermediaries discussed how other changes to their trading behaviour might indirectly result in changes to their modes of transport.

A few UK businesses noted that their modes of transport might change if they do end up moving their place of manufacturing to Europe. They considered that the new location would call for a re-evaluation of their current modes of transport, but this was about the only situation where they considered their modes of transport would change.

“Dependent on what decision is made about best places for manufacturing the goods.. may do more manufacturing in Germany.” (UK Business, 50 to 99 Employees)

A number of UK intermediaries anticipated that their routes of trade might change as northern ports become more appealing due to anticipated greater delays at the southern ports. If they opted to use a northern port, then their modes of transport may vary slightly. Specifically, they will need to do longer road transits within the UK and, as a result, they will either need more drivers or to allow enough time for more driver rest periods as they travel further distances. Some UK and international intermediaries considered how increased use of the northern ports will lead to a shift towards more unaccompanied trailers being used for channel crossings. For imports, using unaccompanied trailers would mean that there is a new and rested driver ready to collect the goods and to start the longer road haulage trip south. For exports it means that there would be a rested driver ready to collect and drive the goods in the EU. Using unaccompanied trailers also eliminated potential issues of EU drivers not being able to enter the UK or drive in the UK on their EU licence.

“Dover will disappear. More [goods] will come via old-fashioned unaccompanied ports.” (UK Haulier, 2 to 20 Employees)

“I think a lot of cargo will be transferred to northern ports … I think we’ll see an increase in trade in this area - we will probably pick up a fair chunk of cargo that previously would have been exported by road.” (UK Freight Forwarders, 2 to 20 Employees)

5.6 Changes to customs procedures

As might be expected, traders thought that there would be considerable change to their current customs procedures under a D1ND. However, traders were unsure of exactly how their customs procedures would need to change – this was true across all groups of traders.

Some UK businesses said that they expected their intermediaries to inform them of how to change their customs procedures as they were very uncertain. Compared to UK businesses, UK intermediaries did seem to have a slightly clearer idea of how they anticipated customs procedures might change. International traders were unclear about how customs procedures might change, but they were comfortable to wait and see what they need to do once the final method for the UK exit from the EU is announced.

“It’s unclear whether there will be any real customs changes in terms of duty or processes.” (Freight forwarder, 100+ Employees)

Despite the lack of clarity, traders did anticipate a variety of changes to their customs procedures. Firstly, UK traders were acutely aware that under a D1ND scenario there would be an increase in the amount of administration and paperwork involved with customs procedures. A number of intermediaries and businesses discussed how they would need to ensure that they were resourced to be able to deliver this paperwork. Many traders, and particularly those with more than 50 employees talked about hiring staff internally as opposed to subcontracting external customs agents. The prospect of hiring more staff was seen as less of a concern by intermediaries who assumed they would be able to pass on the cost to their clients.

“Would probably need more staff in the dispatch area to deal with the additional paperwork. Have 4 at present. [We] would need at least one, maybe 2 more.” (UK Business, 50 to 99 Employees)

“If the paperwork increased then we might have to employ extra staff - we don’t have [the] manpower to do this currently.” (UK Business, 100+ Employees)

“We need more staff doing customs clearances - that really is the biggest change for us. Our customers, we need to educate them in order to comply.” (UK Freight Forwarder or Customs Agent, 21 to 49 Employees)

A few small UK businesses who did not operate in niche goods seemed particularly concerned about more administration and the possibility of hiring more staff. They considered that such a steep increase in their costs could push them out of the market. A few were hopeful that, if they were already using a large freight forwarding agent, then they might be able to continue doing the work for them with only a marginal increase in cost.

“We would hope for as little additional administration as possible but potentially it could be a lot of additional administration. Without knowing what it is, it’s very difficult to be prepared. If it’s a lot [of change], that means increasing your staff… which adds to overheads and again means we have got to look at maybe increasing the price of some of our machinery [goods] which may already be becoming more expensive because of the Euro movement because of customs duties. This is certainly a very worrying scenario for us. There would be big question marks on whether we survived that.” (UK Business, 21 to 49 Employees)

Some traders considered that under a D1ND scenario there will be increased need for temporary storage while goods are waiting to clear customs. As mentioned above, international traders were particularly concerned about the capacity of warehousing currently available at southern ports in the UK.

“Probably have to start doing more temp storage on higher value goods from EU.” (UK Business, 100+ Employees)

Some UK intermediaries were concerned about the logistics involved with paying customs fees on behalf of their clients and receiving payment from their clients for these fees. A few had considered how they might need to change their IT systems and accounting software packages to allow for direct payments from a client to the customs officials. Of those who had considered this issue, none had IT systems already in place that could be used to pay and collect customs fees.

“We would request our customer’s Customs and Excise FAS (Flexible Accounting System) account details so we can pay this duty directly to Customs.” (UK Freight forwarder, Haulier, 2 to 20 Employees)

A number of UK and international intermediaries expressed concern over the need for their IT systems to be capable of collecting end destination information. While they thought it was possible to ‘upgrade’ their systems they were not currently ready to do this if such a regulation was enforced immediately.

A few UK intermediaries noted that in addition to the day-to-day increase in administration, under a D1ND scenario they would need to increase their current administration resources even more to make applications for procedures. Such procedures included applying for an Authorised Economic Operator (AEO) status and entering a Unique Consignment Reference (UCR) on all consignments.

“You have to make sure that UCR has been entered and all the customs duties and VAT has been paid… we do it now for non-EU but it’s far less than what we would have to do if the EU entered a similar format.” (UK Haulier or Freight forwarder, 2 to 20 Employees)

Although traders were concerned about the large amount of potential changes that they would need to make to their customs procedures under a D1ND scenario, a small number of UK businesses and intermediaries found comfort in the presumption that it simply would not be possible for authorities to immediately enforce all regulations suggested under a D1ND. There was a sense of optimism that the British government would not want to make the burden of change so onerous that it was detrimental to UK businesses.

“Would the British government want to impose cruel import duties… Or would they have a vested interest in making Brexit work under a ‘No Deal’? It’s no good if they’re going to penalise their own population.” (UK Business, 2 to 20 Employees)

5.7 Changes to use of intermediaries

Traders wanted to continue using the same intermediaries that they are currently using. Some businesses and intermediaries anticipated that, under a D1ND scenario, they would need to do more internal training to deal with the additional customs procedures rather than subcontract new or more intermediaries. Small UK businesses who used large freight forwarding agents hoped that their current intermediaries would be prepared to handle the new custom procedures on their behalf. They perceived hiring more staff as much more problematic than larger businesses and intermediaries.

“I think we will use the same agents – not too much of a change.” (UK Haulier, 50 to 99 Employees )

Traders from all groups said, that under a D1ND scenario, they may initially increase their use of customs agents while they attempt to navigate the new customs procedures. They did not expect to continue subcontracting customs agents indefinitely, however, and expected to stop once their own internal staff were trained to deal with the new customs procedures. Some intermediaries anticipated that, under a D1ND exit, there will be a shortage of customs agents, and the current customs agents will become inundated by the influx of queries. Traders had mixed views about where they thought it would be useful for customs agents to be located. While some thought it did not matter and that customs agents could work remotely, others said it would be useful to have them located at the ports of entry. Customs agents highlighted the need for traders to develop their IT systems so they can transition to trading under a D1ND scenario more easily.

“Hope not to have to use any agents…May need to seek advice from customs brokers at the borders.” (UK Freight Forwarder or Haulier, 2 to 20 Employees)

With expected increases in stockpiling, traders anticipated that there would be an increase in demand for temporary storage and, in turn, for the intermediaries that manage those temporary warehouses. Some UK businesses said that using temporary storage would be their short-to-medium-term solution under a D1ND scenario. Eventually, they thought it would be more cost-effective have their own storage facilities, and that this may not be based in the UK due to the perceived lack of current storage facilities at popular southern ports such as Dover and Folkestone.

“In the short term, we might find a storage facility operated by a Freight Forwarder but in the longer term, we would want our own storage facility in Germany.” (UK Business, 50 to 99 Employees)

Although traders wanted to continue using the same intermediaries, there was a level of pragmatism as they admitted that they would change which intermediary they use if other intermediaries became significantly cheaper under a D1ND scenario.

“Their costs are likely to increase. We have a pricing tool that generates all the prices for the shipping companies – identifies who is cheapest. We may shift business to the cheapest shipper.” (UK Fast Parcel Operator, 2 to 20 Employees)

5.8 Changes to supply chain

Typically, traders were uncertain about how a D1ND would pan out, but they did not expect any major changes to their supply chains. However, there were some distinctions to this view.

“Who knows? It’s just a mess at the moment. All you can do at the moment is increase your stock holding?” (UK Business, 2 to 20 Employees)

As already mentioned, some businesses considered moving at least part of their business offshore. In these cases, they anticipated that this would affect their supply chain.

UK intermediaries also recognised that, if transport delays became too long, this might force their customers to move their supply chain away from the UK. As a consequence, the UK intermediaries would experience a decrease in demand for their service. It was not discussed explicitly under changes to their supply chains, but if UK intermediaries do opt to increase their use of unaccompanied trailers then this would involve a change to their current supply chain.

“If we have something going to the EU then we would have to give longer lead times on goods and that may have a knock-on effect in that it may take too long for goods to arrive from here [the UK] so they may have to source the goods from a different location.” (UK Haulier, 55 to 99 Employees)

One international intermediary and one UK business were considering splitting their supply chain by goods destined for the UK and those destined for the EU to avoid additional costs. This notion was voiced as a possibility but not something that they were proactively exploring as an option at the moment.

“If we manufactured here, we would then export to Europe as finished goods. If we brought them from the States, we’d almost certainly bring in to Europe first. We’d have to split what we brought and send some to UK and some to storage facility in EU… It would be a major change, a major cost, so not great.” (UK Business 50 to 99 Employees)

5.9 Changes to customs simplifications, authorisations and procedures

Traders did not typically understand customs simplifications, authorisations and procedures well enough to understand the role they might play under a D1ND scenario. Traders wanted more clarity about how such simplifications, authorisations and procedures might be applied.

Intermediaries were more likely than businesses to be aware of customs simplifications authorisations and procedures, but they still felt uncertain about the details. After being prompted to consider these procedures during the interview, several intermediaries said they would look further into how such exemptions might assist. However, very few intermediaries had started the applications process – despite the expectation from businesses that intermediaries would advise on these sorts of customs procedures.

“Have never looked into it before but if there was a facility for customers with regular same requirements on a weekly basis to get quick clearance and delivery, that would be useful.” (UK Freight Forwarding, 50 to 99 Employees)

Some intermediaries, who were already using bonded warehouses or were moving bespoke goods in small quantities, were sceptical of whether customs simplifications, authorisations and procedures would be useful to them. Under a D1ND scenario, they considered that their customs procedures would be similar to those that they already use when trading with the rest of the world. It would be simplest to just adopt the rest of the world processes that they already have in place – even though they anticipated there would be delays in transportation and a need to increase their use of temporary storage.

“Subject to switch - we will apply for all or any [customs simplifications, authorisations and procedures] but they would have to add value to our business. [For example] if it allows inspection at Rugby rather than Dover – all subject to the real detail.” (UK Haulier, 2 to 20 Employees)

A very small number of UK intermediaries had started to apply for special status such as the Authorised Economic Operator (AEO) status. One UK intermediary saw gaining the AEO status as critical to eliminating delays at ports for their goods, while others were not entirely convinced it would be worth their while, but were exploring it as a valid option. One international trader mentioned that under a D1ND scenario they would apply for statuses such as ‘Outward Processing Relief’ and ‘Inward Processing Relief’.

“Looking at AEO but don’t know if it is going to help. [We] would look at anything if it had a benefit.” (UK Business, 100+ Employees)

“Would look at additional simplifications like IPR and OPR. [I] anticipate a considerable need for these.” (Agent (across all modes), 100+ Employees)

5.10 Conclusion

Overall, traders tended to anticipate that fewer changes would be required under the FCA scenario than the D1ND scenario. This meant traders tended to feel more prepared for the FCA scenario. However, in both scenarios, there was uncertainty around customs procedures, authorisations and simplifications, and how these would assist with the process. Under both scenarios, intermediaries, and specifically road hauliers were concerned about the capacity of their current technology to effectively trace products to their final destination. Traders felt they needed more clarity on what would change before they could start to plan, to ensure they did not, in their view, waste resources preparing unnecessarily.

6. Appendix: Contextual information

6.1 Contextual information on Customs Simplifications, procedures and authorisations

To facilitate international trade, the UK offers a range of Customs Simplifications for UK businesses that trade outside the EU. These include:

• Simplified Customs Declarations
• Customs Special Procedures

These were referred to by traders in the interviews and further information on them is provided here, to clarify and provide context.

Simplified Customs Declarations are intended to reduce import and export clearance times, administrative burden, and costs for businesses who have a history of voluntary compliance with customs legal and regulatory requirements.

Customs Special Procedures are designed to facilitate trade outside the EU, including operating a Customs Warehouse (to store goods with duty or import VAT suspended), inward processing, outward processing, transit, end use and temporary admission. These special procedures usually allow some form of duty suspension, so the duty is either a delayed payment or is never paid if the terms and conditions of the special procedure are met and the goods are discharged from the special procedure properly.

To utilise these simplifications or special procedures, businesses must receive an authorisation from HMRC and demonstrate compliance with relevant criteria.

In addition, businesses can also apply for Authorised Economic Operator (AEO) status. This is an internationally recognised quality mark indicating that a businesses’ role in the international supply chain is secure, and that their customs controls and procedures are efficient and compliant. AEO status can be granted for customs simplification (AEOC), security and safety (AEOS), or both. The advantages for businesses are that they can get:

• quicker access to some of the simplified customs procedures described above (if they hold AEOC)
• get the right to ‘fast-track’ their shipments through some customs and safety and security procedures (if they hold AEOS)

6.2 Contextual information on research participants

In total, 49 qualitative interviews were conducted. Forty-one were with UK traders; 16 with businesses and 25 with intermediaries. Eight interviews were conducted with international traders: one with a business and seven with intermediaries, which includes freight forwarders, customs agents or brokers, fast parcel operators and hauliers.

The following provides contextual information on each of these key groups.

6.2.1 Traders

For our research purposes, we interpret trader to mean any business involved in importing or exporting that is not an agent, consignor or freight forwarder.

6.2.2 Intermediaries

Intermediaries is a term used to refer to the agents included in this research project, namely: freight forwarders, fast parcel operators, hauliers and customs agents or brokers.

6.2.3 Customs agents or brokers

Customs agents and brokers in the UK usually operate as direct representatives, but they can also act as indirect. A direct representative acts in the customer’s name, as a trader or private individual, and can’t be held liable for your customs debt. The importer or exporter is responsible for any customs debt that may arise as a consequence of the declaration, provided the necessary authorisation is held.

An indirect representative acts in their own name but on your behalf. They can be held liable for your customs debt. The indirect representative and the importer or exporter are jointly liable for any customs debt that may arise as a consequence of the declaration, provided the indirect representative holds the necessary authorisation from the importer or exporter. An indirect representative is not the same as a guarantor. If an intermediary makes a customs declaration for their principle and acts as an indirect representative, the intermediary and the principle are jointly liable for the customs debt. HMRC can chase both entities for the debt.

6.2.4 Freight forwarders

Freight forwarders act on behalf of importers and exporters to get their client’s goods to their destination on time and in good condition, by booking cargo with shipping lines, airlines, rail or road carriers. Some freight forwarders have their own road transport and may carry the goods themselves.

They also may act as a client’s customs intermediary if required, performing the whole process of the supply chain, arranging customs clearance of goods, maintaining all documentation, and overseeing cargo packing. Other responsibilities include: preparing and checking bills of carriage, arranging insurance, ensuring the lowest possible customs charges are levied and, where necessary, arranging storage.

6.2.5 Hauliers

A person or company that transports goods by road or rail.

6.2.6 Fast parcel operators

A fast parcel operator business mainly handles and transports consolidated package loads. Distribution is typically undertaken by air, rail or road. Fast parcel operators can also complete customs declarations on behalf of their clients. To be allowed the simplification to consolidate loads, fast parcel operators need other sorts of authorisations from HMRC.

1. This term is used when talking about traders who trade with countries that are not in the UK or the EU, they are rest of the world countries. ↩

2. This was set out in the policy paper: The future relationship between the United Kingdom and the European Union - GOV.UK ↩

3. Generalised System of Preferences (GSP) allows originating products from a range of countries to be imported into the EU at a reduced or zero rate of duty. ↩

4. The FCA is outlined in the Policy Paper: The future relationship between the United Kingdom and the European Union - GOV.UK ↩