Report hopes final withdrawal agreement on post-Brexit EU relationship can be reached by the autumn to limit potential damage to the manufacturing industry from trade barriers.
A survey of 1000 industrial product manufacturers has found overwhelming support for ensuring ongoing regulatory alignment with EU standards to safeguard trade and ensure a frictionless supply of vital components that underpin sectors such as building services.
A failure to reach a reciprocal arrangement on trade and custom checks is expected to have a particular impact on lower carbon technology development in sectors such as heating, according to the findings. Government is urged in the report to reach a final withdrawal agreement during the autumn at the latest to allow industry to implement plans for life after Brexit.
The survey, which has been compiled by the EURIS advisory body and the independent UK Trade Policy Observatory (UKTPO), concluded that 83 per cent of respondents saw no benefit in moving away from the EU regulatory system that dictates a range of product specifications and environmental standards.
Uncertainty over the exact negotiating position the UK government hopes to pursue before the country is scheduled to leave the EU in March next year has raised fears over the possibility that the country will fail to reach any agreement on key regulations and trade. The advisory body warned earlier this year that leaving the EU without a comprehensive agreement between both parties could potentially lead to customs chaos and trade barriers if not addressed.
EURIS, a body representing 3,000 companies in sectors such as mechanical engineering, has said that its findings indicated that a number of companies surveyed were already experiencing some supply chain disruption.
Currency changes since the 2016 referendum vote on whether the UK should leave the EU and a trend of other companies selecting non-UK suppliers due to uncertainty on the country’s preferred relationship with the EU were identified as having driven this disruption.
Limiting further negative impacts on EURIS’ members is a core Brexit ambition for the organisation, which is made up of manufacturing and mechanical engineering bodies such as BEAMA and FETA.
EURIS said in a statement, “Industrial manufacturing representatives are calling for a withdrawal agreement to be reached with the European Commission at the earliest opportunity to give clarity to industry; they warn that a no-deal Brexit will cause severe damage and must be avoided.”
Lower carbon concerns
One such area identified in the findings that could be negatively impacted by failing to reach an arrangement with the EU was in the supply of lower carbon equipment and technologies. A drastic rise in prices for these alternative technologies was one example of a development that may set back UK environmental ambitions and the competitiveness of British manufacturers.
EURIS said, “In a ‘no–deal’ WTO scenario the focus for low carbon goods will switch to the adoption of the WTO Environmental Goods Agreement, which is a plurilateral deal currently being negotiated by 46 WTO members. This will aim to bring tariffs on environmental goods down to zero. However, it is not comprehensive, as it does not include cleaner vehicles and some low-carbon equipment used in heating, insulation and lighting.”
Ensuring ongoing barrier free-trade where possible with the EU was identified as a vital means of ensuring competitiveness within UK industry, particularly in ensuring an ongoing supply of intermediary products and components to and from EU-based companies.
52 per cent of the group surveyed in the report said that more than half of their sales were intermediate inputs for other companies.
Concern was also noted around the remaining 27 EU member states being urged to prepare for the worst when reviewing post-Brexit supply chains and limiting reliance on UK companies.
EURIS added, “For most companies, changing suppliers is a significant decision, and one very rarely reversed and some EU27 companies have already started to select non-UK suppliers. One third of EURIS survey respondents are already thinking about or have already changed suppliers due to Brexit – sales have already been lost.”
The report also warned against viewing the Brexit process as a choice between exporting either to the EU, or other worldwide markets. It concluded that business that was less competitive in the EU would also be less prepared to trade with other international markets. Maintaining strong alignment with EU standards that the UK played a role in helping to develop was therefore seen as a major factor to successful trade worldwide.
Fears over the supply chain also extended to movement of workers between the EU and UK, with four in ten of the group’s surveyed expecting a skills shortage as a result of any failure to reach an agreement on Brexit.
A total of four per cent of respondents to the survey meanwhile said they had no concerns that Brexit may negatively impact their business.
EURIS chair Dr Howard Porter said the organisation was maintaining its calls for clarity on the final shape of a Brexit deal, urging for a withdrawal agreement to be reached by this autumn to better protect industry and manufacturers in specialised sectors such as building services.
He said, “As this report and our member survey clearly show, further delays and the risk of no-deal will result in significant long-term damage to the UK manufacturing sector and will put at risk the industrial product supply sector’s £148bn contribution to the UK economy.”
Professor L Alan Winters, director of the UK Trade Policy Observatory at the University of Sussex, said a proposed ‘no deal Brexit’ had been discussed across industry for months. However, he noted that the survey reflected real world fears of a wide range of industries working in manufacturing.
He said, “This critical sector is already starting to hurt and if its needs for frictionless trade with the European Union are ignored, a quarter of UK goods trade will be vulnerable to cuts. The threat to jobs is alarming.”