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‘No deal’ uncertainty tops HVACR fears as Commons' Brexit vote nears

Manufacturers and industry bodies working across the building services sector argue that ongoing delays in deciding the final direction of Brexit are increasingly untenable

A no deal Brexit remains the worst-case scenario for the HVAC industry as parliament braces for a vote next week over whether to back an exit agreement reached between the government and the EU.  The claims have been made by a number of manufacturers and industry bodies concerned about a failure by authorities to have a clear Brexit plan in place.

The vote, which was delayed from late last month over government fears of a defeat in the House of Commons, will now take place on Tuesday (January 15) with just over two months until the UK will leave the EU.

However, uncertainty over the nature of Brexit is expected to continue with the opposition committing to vote down a deal that has also divided the government itself over whether to approve the broad exit terms put forward by Prime Minister Theresa May.

Rejection of the agreement, which will define a future relationship concerning trade and movement of goods, is widely expected among political pundits.

Hypothetical next steps within parliament if the deal is rejected have ranged to calling for a general election to resolve the deadlock, trying to extend the deadline for leaving the EU, or continuing preparation for leaving without any arrangement. In short, nothing is known.

Failure to have so far have reached an agreement during a two-year countdown to the UK’s exit from the EU, which began in March 2017, has already created uncertainty within the building services sector with major manufacturers noting an ongoing market decline.

One major multinational manufacturer with operations in the UK and the EU, argued that recent construction market declines would be exacerbated by a failure to ensure some form of alignment and a transition period in order to gradually phase the exit without immediate shock and market disruption.

Mitsubishi Electric UK and Ireland, a branch of the multinational’s wider European operations, is an importer of products that makes it reliant on steady traffic of sea containers coming into UK ports. Some delays at ports were therefore expected from Brexit.

Deane Flint, vice president of the company’s UK and Irish operations, said that a standard business model of holding two and a half months of products had meant it was not having to stockpile goods or components in fear of disruption from Brexit.

However, with the branch committed to retaining its current structure, the company will have to cover the brunt of tariff costs from sending goods to its operations in mainland Ireland, which will remain an EU member state.

Mr Flint said a much greater concern for the industry was arguably the wider likelihood of ongoing economic and market decline expected regardless of whether there is a no deal Brexit, or a negotiated arrangement such as the government’s proposed exit deal.

He cited calls recently made by the CBI that have urged government to give clarity to industry as soon as possible on the direction of Brexit to allow time to prepare for any potential market changes.

Mr Flint said, “Right now we need certainty above all else, even if it is not nice.”

Kevin Wellman, the chief executive of the Chartered Institute of Plumbing and Heating Engineering (CIPHE), said that regardless of one’s political views on Brexit, the current uncertainty was creating market instability for businesses of different sizes.

Mr Wellman said he believed that stockpiling was one example of measures being taken across the HVACR sector to try and overcome challenges, but the exact extent of this was unknown.

He added, “It is also unknown whether there will be complete resolution within parliament after they vote on the withdrawal agreement January 15. Either way there are sure to be further dramatic events between now and the leave the EU deadline of March 29, 2019!”

“One question is regardless of the outcome of the Brexit vote is, how long will it take for the UK to recover and achieve the ongoing vision of the government’s Industrial Strategy?”

No deal fears

Earlier this week, the EURIS Taskforce confirmed it had written to the Prime Minister for a second time in less than 12 months to reinforce its view that no deal should be avoided at all costs in the Brexit debate.

A letter from the body, which represents 11 industry bodies that includes the building services sector, cited its own analysis over the severe damage facing industry from a lack of agreement and alignment with the EU post-Brexit.

The findings concluded that a failure to reach an agreement by the end of March would lead to job losses and severe long-term damage to UK industry and thus must be avoided.

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