U.K. May Have No Choice But to Extend Customs Union, Panel Finds

(Bloomberg) -- The U.K. may find prolonging its membership of Europe’s customs union after Brexit is the only “viable” option as new arrangements are unlikely to be ready in time, according to lawmakers in charge of monitoring Britain’s departure from the bloc.

The influential House of Commons Brexit Committee, which has heard evidence from Brexit Secretary David Davis and other ministers, said neither of the customs options the government is discussing are likely to be fully set by the end of 2020, when the U.K. is due to go it alone following a transition period.

“The Secretary of State has ruled out any extension of the Customs Union but in the absence of any other plan, such an extension will be the only viable option,” the panel said in a report on Thursday. The cross-party committee is led by pro-EU Labour lawmaker Hilary Benn.

Government officials said privately earlier this month that some kind of extension would be needed. But the issue is politically toxic, as Brexit-backers in the Cabinet and broader Conservative Party are keen to cut ties with the bloc as quickly as possible. They’ve accepted a transition period of almost two years after exit day in March 2019, but another extension could test their patience.

The government repeated on Thursday that the transition period will end in 2020.

Prime Minister Theresa May’s senior ministers are still debating which of two possible customs regimes to opt for after Brexit -- though the EU isn’t keen on either option. The system favored by Brexit-backers would cost businesses as much as 20 billion pounds ($27 billion) a year, the head of the U.K. tax and customs authority said on Wednesday.

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