UK leaves local leaders on £8M hook for unused Brexit checks warehouse

PORTSMOUTH, England — Boris Johnson’s government has left Portsmouth’s local council holding the bag on a nearly £8 million loan it took out to build a giant warehouse to conduct post-Brexit border checks that may now never be used.

The £25 million custom-built facility on England’s south coast is just one of several throughout the country that cost a combined £500 million-plus in public and private sector cash but are now standing empty after the government delayed checks on select EU goods meant to take effect July 1.

“We are currently £7.8 million out of pocket,” said Gerald Vernon-Jackson, leader of Portsmouth City Council, which operates the Portsmouth International Port running the border checks post. “We have no way of recovering the costs and no offer of financial support from the government.”

The council was able to pair up the bank loan with £17 million it was awarded through the government’s £270 million Port Infrastructure Fund. That allowed it to build the new two-acre piece of border infrastructure in under two years.

Portsmouth council is on the hook for £1 million in loan repayments and energy costs in 2022 just to keep the facility — with its large refrigeration units meant to keep goods like meat, cheese and fruit cool — functioning.

“We can’t just turn the lights off and absorb the costs,” said Vernon-Jackson. “In order to know the [Border Control Post] will operate properly if required in the future, we need to keep the facilities running to a degree to make sure it remains working.”

The council had planned to repay its borrowing by levying charges for customs checks processing in the warehouse.

Ports around the country were effectively “compelled to prepare these” for post-Brexit trade, said Richard Ballantyne, chief executive of industry group the British Ports Association. The British government outlined the system in October 2020. “Now the government is saying it was a commercial decision.”

Yet ports that didn’t take action would have been “disadvantaged,” he explained, as about 40 percent of all trucks from the EU carry animal and plant-based products.

The plans didn’t last long. In April this year, Minister for Brexit Opportunities Jacob Rees-Mogg announced physical checks on animal and plant products imported from the EU now won’t take effect until the end of 2023. The checks were delayed for the fourth time, said the minister, as the government instead pursue a new light-touch digital customs system.

Putting the post-Brexit checks in place, Rees-Mogg argued, “would have been an act of self-harm” with red tape potentially pushing up food prices as inflation hits the U.K. The delay will save British businesses up to £1 billion in annual costs, he said.

Yet the announcement of a new digital system “cast doubt on the future of BCPs,” wrote Portsmouth South Labour MP, Stephen Morgan, in a letter to Rees-Mogg on May 3. “This government’s short-sightedness has left the Port to foot an eye-watering bill for new infrastructure which may now no longer be needed.”

Unlike many others, the port is owned and run by the local council. “Its profits help fund local services, and the impact of this unexpected and unfair bill will be felt across the city,” Morgan warned.

In a reply, Rees-Mogg said he is working with the port on “recouping costs if possible.”

The building is a “white elephant,” said Mike Sellers, director at Portsmouth International Port, that “could be making money” if only it could be converted into a traditional warehouse.

Yet that can’t be done until “we have the revised border arrangements,” said the British Ports Association’s Ballantyne. “And that’s not going to come forward until this autumn at the earliest.”

Ports that have lost out, he said, hope “for the government to come up with, say, £100 million plus a bit extra” for retrofitting modifications and support.

Rees-Mogg met with Portsmouth North MP and Trade Policy Minister Penny Mordaunt on Monday to discuss what the government can do to help compensate them. “We’ll work to find new opportunities for redundant facilities,” Mordaunt wrote after the meeting.

The U.K. government says its property service is looking to help find a new use for the buildings, while arguing that the country’s current state aid regime limits its room for maneuver. Plans to reform that regime are expected in the fall, along with the promised new border model.

“We are currently working with ports, including Portsmouth port, on an individual basis to assess the impact of the July import controls decision, and to address any issues or concerns they may have,” said the Cabinet Office. “This includes seeking to identify ways of preventing unnecessary additional capital cost and minimising ongoing costs.”

The fall deadline seems optimistic, Ballantyne said. “Knowing the whole Brexit process from before, it’s probably quite unlikely that we’ll get a kind of firm idea this autumn,” he said. “It will probably slip into next year.”