Business & Brexit: Thriving and Surviving

There has been little escape from the Brexit negotiations of late. At the recent EEF meeting held at Leamington Spa talk centred on the UK’s departure from the European Union and how this will affect manufacturers and their businesses in the immediate future.

Points up for discussion included:

Possible customs arrangements that the government has just released which set out two options:

1) one acknowledges the administrative friction likely to result post-Brexit and proposes a series of measures to minimise customs procedures at the border, and the other

2) attempts to mimic the EU border in the UK and thereby extend an EU Customs Union to the UK

The paper acknowledges for the first time two important principles – the need for a transition period and that businesses should not have two adjust twice in the Brexit process (once to transition and then again to Brexit).

In EEF’s view both proposals do in fact involve a two-step transition. The second proposal is unworkable and untested and while the first option is more likely to result, unless the transition period extends the current EU single market and customs union access until Brexit day 1, businesses will still have more than a single point of change to adjust to.

This paper highlights ways in which this friction may present itself at the border between the UK and EU and beyond, and raises some of the key issues that manufacturers need to consider and address across their supply chains.

The meeting not only discussed in-depth regarding the introduction of tariff and non-tariff barriers post Brexit, a hard border between the EU and UK will exist, requiring new customs administration documentation and the need for goods to be checked to ensure compliance with EU standards, market and legal requirements.

Manufacturers will have to prove goods entering the EU from the UK are of UK origin, in accordance with a pre-agreed set of rules of origin between the EU and UK. The UK will have to set its own external tariffs to be faced by EU and other country goods entering the UK. Tariffs (customs duties) will apply to goods both being exported to and imported from the EU.

The Tariff schedule to be adopted will mirror that of the EU and needs to be agreed in the World Trade Organisation (WTO). Any preferential zero tariff rates will need to be agreed between the EU and UK as part of a comprehensive FTA agreement.

The UK will have to negotiate its own external trade policy in the WTO and in negotiating FTAs with other countries.

Additionally, the topic of EU citizens living and working in the UK and how the new rules will affect their status was also covered. Under the proposed plans, EU nationals, who have spent five years or less in the UK, will have to apply through the Home Office for a residency document over a two-year period. The right to apply for the new status will apply to family members and partners resident in the UK at the cut-off date, including those who do not yet have the five years’ residence.

Those living in the UK lawfully for at least five years will be granted ‘settled status’ and can live and work just as they can now. All EU citizens who move to the UK before the cut-off point will be given ‘blanket permission’ to stay for a period – up to two years. The application process to live and work in the UK from the EU has recently been modified and the government insists that a good working relationship between the UK and EU countries needs to be maintained.

Jenny Holloway comments: “We have workers from Turkey, Eastern Europe, (including EU countries) and China and they are truly skilled in what they do. The reality is we lost the garment manufacturing skill base when production went off-shore and now these workers are bringing these essential skills back to the UK as well as training the next generation. We employ over 100 people in total and over 75% are migrant workers. These individuals, mainly women, want to work and they’re very proud of their skills and post-Brexit we need to ensure it stays that way.”

Commenting on the speech by the Prime Minister, Rt Hon Theresa May MP, in Florence on the 22^nd September 2017, Terry Scuoler, Chief Executive of EEF, the manufacturers’ organisation, said:

“This is a welcome step forward which shows the Government is addressing business’ key requirement for a smooth transition. We have been pressing for clarity and some common sense and the Prime Minister has responded to this in a positive manner.

“A sensible transition period avoiding a cliff edge and two sets of change for companies and, which maintains a stability from a business perspective, is something companies will welcome. What business wants to see now as talks progress are positive negotiations towards a final deal that involve as much tariff free and frictionless trade between the UK and the EU as possible.”

“We also welcome the time of the debate and a willingness to continue to support and fund joint initiatives on research and education which have had proven benefits for UK science and business.”

“In the same way the Prime Minister’s strong support for maintaining close security ties with our partners sends out the right signal and is welcomed by business here and in Europe.”

To read the latest reports relating to the UK manufacturing sector please click here.

With thanks to the EEF

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