HMRC paid consultants from McKinsey £680,000 for Brexit work

14 June 2018 3 min. read

An ill-fated proposal for a post-Brexit customs arrangement has cost the British government more than it bargained for, after it emerged that McKinsey & Company had collected a fee of hundreds of thousands of pounds for its drafting. The plan was quickly dismissed by the EU, with Brussels ruling out any customs management arrangement without the introduction of a hard border with Ireland.

2017 saw McKinsey clinch a £1.9 million contract for six-months of work with the Department for Exiting the European Union. The deal, which ran from April to October last year, saw the strategy consulting giant assist with the implementation of nearly 800 Brexit-related plans. The contract helped further paper the cracks at Whitehall, following the extensive streamlining of the British Civil Service in recent years, but while the future hiring of some 5,000 staff was thought to further boost the Civil Service’s operations ahead of 2019’s deadline for negotiations with Brussels, the latest news seems to indicate that that figure is not enough. 

A contract awarded in January and lasting until March saw McKinsey taken on to provide an “assessment of import initiated supply chain and commercial feasibility” of the UK continuing to manage tariffs on imports destined for the EU despite having left the bloc’s customs union, while also enforcing its own independent tariff regime. The assessment, which saw McKinsey paid £680,000 for its troubles, formed one of two customs proposals put forward by UK negotiators in Brussels, in talks aimed at avoiding a hard border between Ireland and Northern Ireland – however the EU dismissed the scheme almost as soon as it arrived in Brussels.HMRC paid consultants from McKinsey £680,000 for Brexit workWhile McKinsey has not commented on the work, a spokesperson for the Treasury – which oversees Her Majesty’s Revenue and Customs (HMRC) – was quoted as saying that the government wanted to “harness expertise from both the private and public sector” to “ensure trade with the EU is as frictionless as possible.” 

The UK Government has subsequently faced fierce criticism for its paying of private sector consultants hundreds of thousands of pounds to help formulate a plan that ultimately proved fruitless. Brexiteers in Prime Minister Theresa May’s party lambasted the “customs partnership” plan – known in Whitehall as the “hybrid model” – with leading Eurosceptic Jacob Rees-Mogg describing it as “completely cretinous” and a “betrayal of common sense.” 

Meanwhile, Brexit Secretary David Davis also shown limited enthusiasm for the proposal, having previously told an audience of American business people as far back as September that it was merely a “blue sky idea.” When asked earlier in 2018 by MPs on the House of Commons European scrutiny committee which of the UK’s two customs proposals he preferred, Davis added, “What is the point of paying consultants to do this work and to make the decision in advance?” 

In a statement, Labour’s Shadow Brexit Minister Jenny Chapman, whose party has called for a customs union with the EU, accused the government of “wasting time and money” on alternative customs models by “outsourcing the problem to a private consultancy.” Chapman said the government should publish the outcomes of McKinsey’s work so MPs could “scrutinise the feasibility” of the government’s customs plan transparently.

As the implementation of Brexit at a legislatory level continues to prove heavy work for the government, having scarcely survived a major vote on the matter in June to complete negotiations with or without a deal, without having to face further “meaningful votes”, the executive will be keen to avoid further criticism.