Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

HVAC Brexit warnings intensify as parliament escalates no-deal battle

parliament works

Numerous trade bodies such as BEAMA retain calls for a withdrawal deal being a mandatory part of the Brexit process and avoiding costly disruption in an already unsettled HVAC market

Representatives of various key UK political parties have met this week to discuss how parliament can block the government from leaving the EU on October 31 without a withdrawal agreement.

These fears build on ongoing concerns from industry and academics about the impacts on business and specialist industries such as the HVAC sector from a sudden and abrupt exit from the EU, which remains the UK’s most significant trade partner.

Key proponents of moving ahead with a no-deal Brexit later this year have argued that the complexities of leaving the EU mean that a complete cut off from the region’s single market is preferable to any further delays beyond October. The single market allows for the free trades and movement of goods, services and people with other EU countries. Abandoning the single market and its standards is favoured by some Brexiteers that hope to reach new trade deals, with a whole new approach to standards with other countries.

However, a series of recent reports warning about market and border disruption have led to calls for a negotiated exit that retains a closer relationship with existing European partners.

The BBC has reported that Labour leader Jeremy Corbyn has met with the Liberal Democrats, the SNP, Plaid Cymru, and the Green Party over the issue and reached a strategy on preventing a no-deal exit.

Topics of the discussions were said to include potential options in Parliament and in the courts to ensure arrangements are in place with the EU to try and secure trade and regulatory links as a condition of any Brexit process. MPs also hope to prevent any possibility of parliament being suspended, such as through a General Election in the late autumn, that would see an automatic withdrawal go ahead on October 31.

Finance fears

News of the intervention comes as various industry and trade bodies from around the country continue to express concern over the likely financial and regulatory complications of leaving various systems and standards that the UK has adopted and help devise as an EU member.

Government has recently been warned by key players in the construction sector that ensuring a withdrawal agreement to leave the EU is reached, as opposed to opting for a sudden no-deal Brexit in October, could save the construction sector billions of pounds in lost output.

The claims were made in an open letter sent to Prime Minister Boris Johnson from a range of organisations representing contractors, engineering consultants, products manufacturers and suppliers.

Organisations including the Construction Products Association (CPA), BuildUK and the Federation of Master Builders have this month written to the prime minister urging him to heed expert advice about the financial risks of a sudden exit from the EU.

Shared forecasts from the signatories have concluded that a smoother Brexit with some form of withdrawal agreement could see an increase in construction output of over £1.2bn by the end of 2020.

However, fears are raised in the letter that the opportunities of work within house building and the commercial construction sector could be reduced by up to £10.5bn if the government’s threat to leave the EU on October 31 without a deal are realised.

Signatories of the letter have reiterated wider industry calls to avoid a no-deal Brexit based on its members’ expertise and information shared with the government on the dangerous uncertainty Brexit has posed since the EU referendum in 2016.

The letter stated, “While we recognise and respect the referendum result, we believe the UK must leave the EU in a considered, managed way in order to avoid the likelihood of massive short-term disorder and potentially long-lasting damage.”

A key concern for the signatories is that despite their combined importance to the built environment and the wider UK economy, members have no idea of the cost of material and goods will be to ensure construction work can continue after October 31.

These cost fears have been exacerbated by what the letter describes as a sharp fall in major office projects and construction activity since the EU referendum as based on data from both the Office for National Statistics and Markit/CIPS.

The letter stated, “This comes whilst our members seek to properly prepare for an unknown future after October 31. As in other sectors, they are spending time and resources on stockpiling; transportation and logistics alternatives; auditing and guaranteeing the resilience of their supply chains; and vetting contractual risks and obligations.”

Stockpiling pressures

From a wider industry perspective, trade body BEAMA said that a lot of stockpiling had been undertaken by its own members in March over fears about being unprepared for a no-deal exit on the original Brexit deadline that was set for 11 April. After parliament failed to agree a deal negotiated by former Prime Minister Theresa May, the remaining EU member states granted a ‘flexible’ six-month extension for the UK to reconsider options for proceeding with Brexit.

Yselkla Farmer, policy and marketing director for BEAMA, said that organisation had continued to work closely with key government departments on better preparing its members for the complexities and drastic changes in operating conditions anticipated from a sudden October Brexit.

She added, “Despite manufacturers’ best preparations, any single component in the supply chain stuck at a port due to logjams or whatever problem may occur, means that product will not be ready despite efforts made at other stages in the supply chain.”

“I think our members are very aware of how fragile the supply chain might be in a no-deal situation. Despite all the efforts they make to prepare, they still expect problems to occur.”

Ms Farmer said that before a previous agreement was reached was reached with the EU to delay Brexit from April 11 until Halloween, organisations across the HVAC sector had undertaken steps to try and limit possible supply chain disruption.

She added, “It’s not a secret that companies have spent large amounts of money stockpiling for a no-deal back in March. Manufacturers I suppose are wary of being unable to afford to take such measures again, especially when the political situation might change in a few weeks anyway.”

Questiosn also remain over whether the HVAC sector would be financially able to stockpile any more considering the previous costs seen in the warehousing of additional stock as demand intensified earlier this year.

WTO terms

Ms Farmer said that BEAMA was aligned with other industry bodies in seeing a withdrawal agreement being reached with the EU as the only desirable outcome for proceeding with Brexit.

BEAMA is also part of the EURIS Taskforce, which brings together manufacturers and engineers from a range of industry bodies and has published a range of research into different Brexit scenarios.

One of these reports looked specifically at what it would mean for companies working in the building services and HVAC sector to trade outside of the EU under World Trade Organisation (WTO) rules.

Ms Farmer said that the findings concluded that the UK would be only one of three countries that would be trading, at least temporarily, under WTO rules.

She said, “One of these countries is Syria, so we would be in the same trading leagues with Syria in terms of our rights globally.”

“Nearly, all other countries, even if they don’t have free trade agreements, have anti-dumping policies for border countries and we will not have any of that. I think some discussions in government suggesting moving over fully to WTO terms is ok is not an opinion shared in our industry.”

A bad time for further uncertainty

Earlier this month, the chief executive of the Specialist Engineering Contractors (SEC) Group told H&V News that the government’s threats to proceed with a no-deal Brexit on 31 October would be potentially “horrendous” for the HVAC sector.

Rudi Klein added that concerns about poor payment practices and upstream insolvency that preceded Brexit, would be exacerbated by the uncertainty of leaving without any kind of deal.

Mr Klein argued that the challenges posed by failing to reach a deal with the EU on terminating the UK’s membership status might be weathered if not for the already perilous state of industry finances. This includes concerns exposed by the collapse of Carillion last year.

He said, “I think that these cost pressures that we are talking about, particularly with a no-deal, will mean that we have go to redouble our efforts to change our procurement and payment practices within the industry. If we are not going to do that, the outcome of a no-deal Brexit could potentially be horrendous.”

“If you had a healthy, profitable industry and if all the firms we are concerned about in the M&E sector were all doing pretty well and payments practices were good and working well, we could weather no-deal… But that isn’t the case.”

Trade barriers and regulatory challenges were highlighted by Mr Klein among a number of major interconnected concerns that included anticipated difficulties in ensuring sufficient skilled labour can be resourced from outside the UK to meet market needs in the HVAC sector.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.