What does leaving the customs union mean for the UK?

  • Brexit

  • Video report by ITV News Business Editor Joel Hills

The Government has said that it wants to leave the customs union - a move that could have major impacts for many UK businesses.

Currently, the UK is a member of the European-wide trading bloc; a trading alliance that covers every EU country and Turkey.

It means that there are no charges on goods that are moved between members states - but items brought into the customs union area are subjected to tariffs set by the EU.

Leaving the Customs Union means the UK would be free to set its own import tariffs and strike its own trade deals with the rest of the world.

But it risks losing out by seeing taxes on goods coming in and out of the European Union - the country's biggest trading partner.

Ministers hope to solve that problem by agreeing a bespoke 'frictionless' trade deal with the bloc.

But the EU's Michel Barnier warned that exiting the trade union will leave Britain facing "unavoidable" trade barriers.

Former trade minister Lord Price said it was right for the UK to leave. Credit: ITV News

There are several option that ministers are mulling.

One is a customs partnership in which the UK strikes some sort of bespoke free trade deal of its own with the EU bloc, but retains the freedom to make its own deals with third party countries around the world.

However, it is understood that Brussels is indicating that hopes of any such arrangement are unrealistic.

Ministers are also looking at a partnership, where the UK aligns wits rules with the EU, but still has the freedom to strike third-party trade deals.

A third option could be a streamlined arrangement that see Britain adopt separate trade rules but use technology to help streamline movement of goods over the borders.

The debate opens up questions over the Irish border. Credit: ITV News

The planned exit from the trade bloc opens up thorn questions over the Northern Irish border.

Many fear that it could lead to a hard border with the Irish mainland. The UK has said it is confident that it can find a technology-based response but has not provided details.

Despite the doubts from many quarters, Lord Price, a former trade minister, says Theresa May is right to strike out of the union after Brexit.

"Remaining in the customs union constrains us," he said.