05 October 2017
The Assembly will debate the External Affairs and Additional Legislation (EAAL) Committee report on its inquiry into the implications of Brexit for Welsh ports on 11 October. The Committee considered the risks and opportunities which Brexit presents for Welsh ports, and the steps needed to mitigate risks and secure benefits.
Alongside formal evidence in Cardiff on 12 June, members of the Committee visited Dublin on 19 June to meet with key stakeholders including the Irish Minister for Transport, Tourism and Sport, Shane Ross TD, and officials from the Department of Foreign Affairs and Trade. The visit reflected the importance of Irish port traffic to Welsh ports which are a key entry point to the “UK landbridge” between Ireland and continental Europe. A recent Welsh Government statistical bulletin on sea transport highlighted that, in 2015, 72% of HGV traffic between the Republic of Ireland and the rest of Europe passed through Wales.
In terms of economic impact, a 2011 study commissioned by the Welsh Government found that Welsh ports directly supported 18,400 Welsh jobs. Similarly, a 2014 study by Arup (PDF 583 KB), commissioned by Associated British Ports (ABP), found that ABP’s five south Wales ports contributed £1.4 billion per year to the UK economy, including nearly £1 billion within Wales, and supported 15,000 Welsh jobs.
The Committee made eight recommendations. The Welsh Government’s response (PDF 223KB) accepted five, with the remaining three accepted “in principle”. The recommendations were structured around three key areas.
The future of the Irish border
The Committee concluded that light touch customs arrangements through a possible ‘soft’ post-Brexit Irish land border would be a significant risk if a ‘hard’ maritime border with more stringent checks was implemented between Wales and Ireland. The Committee found evidence that such a differential border could:
severely disadvantage Welsh ports and result in a loss of competitiveness leading to displacement of traffic from Welsh ports – principally Holyhead – to ports in England and Scotland, via Northern Ireland.
However, the Committee was less concerned about the suggestion that the UK landbridge might be bypassed altogether through direct links from Ireland to continental Europe.
A key recommendation in this area, accepted by the Welsh Government, was that the Welsh Government should continue to press the UK Government to ensure that Welsh ports are not unfairly disadvantaged as a result of differentiated border arrangements, and to keep the Committee updated.
Recent papers on the future of the Irish border from both the UK Government and the European Commission’s negotiations task force express a desire to avoid a “hard” Irish land border. However, future border arrangements remain to be negotiated.
The future of customs arrangements
Post Brexit customs arrangements were a second key Committee concern. The report concluded that customs delays could significantly impact on Welsh ports which handle “roll-on roll-off” traffic, particularly Holyhead and Fishguard. Both ports have seen significant growth in traffic since completion of the Single Market in 1993.
The Committee was concerned that a suitable technological solution for customs may not be in place when the UK leaves the EU in March 2019. It heard that many Welsh ports “lack the physical capacity to accommodate new customs and border checks” and called for transitional arrangements “to ensure that our ports don’t grind to a halt”. The Prime Minister’s Florence Speech, which called for a two year implementation period for any agreement, may provide some reassurance.
In July 2017 the National Audit Office (NAO) published a report on the development of HMRCs Customs Declaration Service (CDS) system. Although this project predates the EU referendum, the report indicates the potential scale of the challenge. It highlights HMRC estimates suggesting that, subject to the details of any customs deal, Brexit could see UK customs declarations increase from the current 55 million to a maximum of 255 million per year. The NAO notes that the current HMRC system can process a maximum of 100 million customs declarations per year. It found that a significant amount of work remained to be done on CDS and “there is a risk that HMRC will not have the full functionality and scope of CDS in place by March 2019”.
However, the CDS system is only part of the story in handling post Brexit customs and much remains to be negotiated. In August 2017, the UK Government published Future customs arrangements: a future partnership paper which proposes two possible broad approaches to customs: either a “highly streamlined customs arrangement”; or “a new customs partnership with the EU”.
Subsequently, in early September, the EU published a position paper on customs which notes that principles must be agreed on customs arrangements for the longer term. However, again, the detail of those principles remains to be agreed.
Amongst the Committee’s recommendations in this area, recommendation 6 asked that the Welsh Government respond to the report by setting out how physical capacity constraints at Welsh ports should be handled, and develop a highways contingency plan to manage congestion resulting from port delays. The Welsh Government accepted this in principle only, noting the complexity of dealing with capacity constraints. It remains to be seen whether this is sufficient as Brexit day approaches rapidly.
Engagement with the Irish Government
The final section of the report looked at engagement, transport links and opportunities. The key issue here was the lack of engagement between the Welsh and Irish Governments. Following its Dublin visit, the Committee was “extremely concerned” by the fact that the Cabinet Secretary for Economy and Infrastructure, Ken Skates, had not at that point met with Irish counterparts.
Recommendation 7 called for the Welsh Government to “urgently address the lack of engagement it has had with counterparts in Ireland and other EU member states on the issue of ports”. The Welsh Government response accepted this, noting that it “has engaged with EU member states to understand areas of risk and opportunity, and will continue to do so”. However, the Committee noted that during oral evidence the Cabinet Secretary had said that a meeting with his Irish counterparts had not been sought until that week.
Whether Welsh ports have an easy transition to Brexit or a rough ride depends on many complex factors with much still uncertain. Yet the stakes are high given the economic importance of our ports. This debate will allow Members to probe further whether the Welsh Government’s response and the steps that it intends to take are sufficient for the task ahead.
Article by Andrew Minnis, National Assembly for Wales Research Service
Image from Flickr by Gosport Flyer. Licensed under Creative Commons.