Whilst the avoidance of a no-deal disaster is a welcome development, the UK’s new relationship with the EU presents some formidable challenges for manufacturers, writes Make UK CEO Stephen Phipson.
After such a long and difficult period of negotiations we welcomed the agreement signed on Christmas Eve as we’ve always been clear that a no deal outcome would have done catastrophic damage to manufacturing in Britain. The deal ended more than four years of uncertainty and dispute, during which investment stalled. The starting point is that we now have clarity from which we can build but there will be many months, if not years, of negotiations ahead to iron out faults with the deal.
There are significant non-tariff barriers and obstacles to change that are already having a measurable impact: Manufacturers had fears over delays/border checks and regulations and these are now coming to fruition even before we get back to anywhere near normal levels of trade.
So what are the major challenges that manufacturers are facing from the agreement?
Firstly, there is no bilateral easement or phasing of new arrangements. The Trade agreement will introduce new rules that the UK Government and EU will need to enact and set out in guidance to provide the framework that will allow for the legal certainty required by firms to conduct trade. The timing of the provisional trade agreement does not address all of the challenges that the economy is responding to at the end of the transition period. To help address the immense implications, the UK and EU to urgently conclude a series of bilateral easements for a period of time so that Business in the UK, EU and globally who are dependent upon the efficient and frictionless trade between both Parties, have time to adjust. Without such adjustments, trade will be disrupted, businesses will become less competitive and increase broader economic vulnerability at a time when maximum co-operation is necessary.
The provisional agreement has done nothing to resolve the significant paperwork filling that businesses will have to get used to – an estimated up to 400 million new forms
Second there are major challenges in dealing with Rules of Origin. The agreement delivers on duty and quota free trade, only so long as exports meet stringent local content requirements. The lack of inclusion of allowing imported non-EU parts to count towards the agreement’s rules-of-origin thresholds, which determine whether a product can be traded tariff-free or not, will provide complications for UK business and could quickly lead to punitive tariffs being placed on UK business.
Third, Conformity Assessment. The failure to include provisions allowing UK-based product testing and assessment bodies to continue certifying products for the EU market will add additional costs for firms supplying goods requiring such authorisations to supply goods to the EU, NI and GB markets.
Fourth is the implication for short term business travel and non-recognition of professional qualifications. This is a very significant problem for many industries as movement of key personnel to carry out work in the EU will be much more restricted.
While the agreement allows for short-term business visits (for example, for discussions on a contract for sale) as well as provision of services, these are all subject to numerous restrictions. For example, independent professionals must possess a degree and six years’ experience to qualify for access, and some sectors still remain closed to them. They may still be required to apply for visas or work permits and will be dependent on the sector and/or member states.
These issues present formidable challenges but the sector has demonstrated during the pandemic that it is innovative and can rise to challenges, adapt and pivot
Fifth, the provisional agreement has done nothing to resolve the significant paperwork filling that businesses will have to get used to – an estimated up to 400 million new forms. The cost to business from this has been estimated at £13bn and even after all systems have bedded in and the massive early queues at our ports have normalised, we would still expect each delivery to take longer than it did before this deal. In today’s optimised supply chains, this could impact on investment decisions in the UK in the longer term and could see the relocation of integrated supply chains.
Finally, there will now be dual bodies in the UK and the EU to certify products containing chemicals which will create significantly more cost and increased bureaucracy without any advantage. This will especially be a problem for small companies who will have to register their products in the EU REACH whilst also doing the same for an equivalent UK REACH, which in reality is quite a small market.
These issues present formidable challenges but the sector has demonstrated during the pandemic that it is innovative and can rise to challenges, adapt and pivot. The UK remains the 9th largest manufacturing nation in the world and there is no reason to believe that it won’t overcome the challenges that this new trading relationship will bring as it explores new markets, especially in Asia. We now need a re-booted long-term industrial policy to support those efforts.
Stephen Phipson is CEO of Make UK, the manufacturers’ organisation
Index image: stock.adobe.com
So, Make UK have taken over all of the EEF’s functions and approaches. Fundamentally this remains an operation supporting the owners of businesses with little regards for the actual businesses involved. Sadly, these attitudes are encouraged by the general UK media with little opposition allowed, as they provide nice strident doom-laden headlines.
Certainly there are problems and issues to resolve and they are not very difficult: my company has sold its wares mainly outside of the EU for many years and even WTO terms are not difficult to work with. As the UK has been de-industrialised by asset stripping, low-investment policies led by the EEF and CBI we import more and more of our goods from the EU which of course makes us less competitive against EU suppliers who make the parts.
The people of the UK (apart from the metro-elite) recognised the trend to off-shoring and voted for escape, in the hope that jobs might re-shore.
SOVRINTY!
We now know that Brexit really means significantly more cost and increased bureaucracy without any advantage.
I just sat through an hour of Intertek overview just on all the new procedures for CE, UKCA, UK(NI)+CE and all the other pallava we didn’t have to go through before this. It’s an hour of my life I resent having to spend – and the coming hours and hours of red-tape-confusion-bureaucracy-cost makes me want to abandon manufacturing in despair.
What else is an Engineer to do?
The whole thing is a disgrace how could the British public be aware of all the complex problems that are arising. It was put to the Nation to vote on a subject that could not be explained in detail and turned out to be decided on both emotion and nationalism. Whichever way people voted they now try and defend their actions but the truth is they did not know both sides of the argument. We now have British industry suffering the consequence of these actions brought about by the stupidity of a Government that put it to a national vote.
Just seems to me to be typical EU bloody mindedness towards us as we got what we wanted , and basically left their “club”.
There does though, seem to be a lack of foresight on behalf of the government in clarifying exactly what the changes to exporting paperwork would be.
It is a real shame that the UK did not go for Customs Union deal – this would have obviated the need for the 400million extra forms… What is also frustrating is there is no political party in the House of commons which is a”rejoiner” party. Bizarre – while nearly 50% of the voting population in 2016 voted to stay there is no party representing them in Parliament. There are many more points similar to the above which should be made and will become clear in time, eg not participating in the 3rd Level Eramus programme – daft! Anyway we will all in business make the best of the situation despite out politicians.
On the fifth challenge enumerated by Mr Phipson I’d like to question: why paperwork? When I get email notification my vehicle excise duty is due, I go online to confirm a few details, then the website checks I have a valid insurance certificate and a current MOT test certificate, accepts payment from my debit card and within a few minutes another email arrives confirming my car is now taxed. Enforcement is (I assume) by automatic number plate recognition (ANPR) and a tip-off to the local police by DVLA. It’s a seamless process and no inked sheets of wood pulp needed to change hands
Surely an IT system could be developed to streamline cross-channel commerce by removing the need for physical media. The quoted £13 billion cost ought to be incentive enough …
The nett cost of being in the EU was £9Bn, compare that to the estimated £13Bn above and weep
So why did the politicians sell to the Great British Public an oven ready turkey. As an aside I find the Chinese stuffed out with 5 axis milling machines and all the high tech toys for high end manufacturing. And their labour rates are 25% of UK. Solution is to admit a mistake and “go to the back of the queue” to rejoin the largest single developed market in the World. Not a happy situation.
Christopher Terrell
http://www.efc.ltd.uk
Anyone who ignored the political screaming & looked at the facts, knew that in 2014, two yrs before the vote.
But the majority of people voted with misinformation (from both sides); the price of democracy seems to be uninformed mob rule.
Looking at some stats for UK port freight in 2017 (24 million ‘units’ moved in a year) may I request sources or references for the “400 million new forms” figure also how the £32.50-per-form cost is arrived at?
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/762200/port-freight-statistics-2017.pdf
While the bureaucratic issues at ports will eventually be sorted out, the reality of the situation is that the impact on UK businesses is beyond question: British operations will be more expensive, more complex, and many will be moved away from the UK. The debacle over the last few weeks illustrates vividly that the Government didn’t understand what they were negotiating or what they agreed to. Moreover, by only giving the deal cursory debate and virtually no exposure to businesses and professional bodies, they have signed up to something which is not fit.
There has never been any sustainable case for Brexit, whatever those shouting “sovereignty” and “borders” might shout. While supply chains and operating models will change, the reality is simply this: the British economy will be reduced in size, the UK will be reduced in international relevance, British people will suffer financially much as they have had hard-fought-for rights, freedoms and privileges ripped from them for generations, and all for nought.
This isn’t EU ‘bloody mindedness’ – this is UK government regs 100% – we could have had a customs union at the very least, but .. SOVRINTY!!
Most of the Engineers readership were (and still are) remainers. The was losing more jobs every year to the EU and the balance of trade with the EU was deteriorating annually. The UKs biggest business sector with the EU is as an importer of their goods. Food etc are much lower cost outside the EU when EU taxes are not applied.
While I loved travelling in Europe, I have seen nothing that has benefited the UK from EU membership. Our problems in selling into the EU will be nothing compared with their problems selling to us when they have to compete freely and fairly. Trade agreements will follow very soon but not for the UK’s benefit!
I would say that the engineer’s readership has always focused on looking at the situation analytically and not emotionally so calling them remainers is not justifiable. Brexit was pushed through with very clever slogans like Dominic Cummins “Take back control” it was never debated on an intellectual level. Before we joined the EU certain areas of our engineering market struggled. Our output in the automotive industry were vehicles that the world market, did not want, our aircraft industry market was controlled by the USA, and the shipbuilding industry were still building ships out in the open on slipways in mid-winter as they had done for the previous century. I am convinced we won’t fall back into how we were before we joined the EU and I am hoping for a bright future looking at how we can capitalise on research and development.
Manufacturing has been under threat in the UK for decades and the biggest threat has been from UK Government Policy not the EU.
Off-shoring and continual awarding of manufacturing contracts to overseas companies has been the major issue – and this won’t stop with Brexit.
Response to Gerry Clark: When I said that most of The Engineers readership were remainers, it was based on the many surveys in The Engineer before the referendum and during the long drawn-out boring internecine fighting that occurred after. This was not intended to be in any way derogatory, just an observation, which the above correspondence on this topic fully supports.
I can only repeat my own view that the EEF – now Make UK, have supported the deindustrialisation policies that have occurred since Thatcher made asset stripping attractive. This has made lots of money for the investors but at the cost of exporting good-quality jobs to the EU and massively increase imports of good that the UK used to export. The UK is becoming a minimum wage economy rapidly.
It does seem to me that many of the articles in The Engineer (and the comments section) revolve around a future based around catastrophe avoidance, and that is just a reflection of wider political and social concerns and ideologies.
We’ve had the whole Brexit, and before that the ‘not joining the euro’ non disaster, running out of oil, overpopulation and GM. And post covid it will be ecological catastrophe ‘for ever more’ and probably endless articles about hydrogen fuel and trade nitpicking, not production. Let’s get back to a more positive, future oriented, ambitious engineering. Engineering that addresses immediate global and national problems – like massive infrastructure, food and product manufacture in the developing countries to bring the populations out of poverty AND creating new industries with well paid jobs in the UK and on the ‘Continent’ with all three plus others as partners in development of much needed ‘stuff’. If we are talking about trade, it should be about trading ideas. I’m not convinced quasi quangos like Make UK actually help much here.
The phrasing of the question is “interesting”. In answering it in relation to the new trade agreement on Goods specifically, one may well think it is too early to say, but “let’s be clear”, and honest, on an economic and social level the new arrangement is “thin” (to be polite), and leaves Goods to be traded to the UK without tariffs, and Services traded by the UK to EU businesses to be prevented.
The Brexit view will say “that’s the club protecting itself”. The honest view is YES of course it is, as that is what a trade agreement is about. Even the WTO is a club, with protection, and does require some cooperation and adherence to international rules, governed internationally.
The EU is more than just about trade, as it is a social and economic agreement, unlike any other, and it is the biggest trading block the world has ever seen. Whatever the doomsayers and critics say, it exists, it works, it’s still here, and is the richest. Probably the healthiest and happiest too, despite all the problems.
Yes, most Remainers, (eg., engineers and managers and company owners) have come to terms with the result, and have “moved on” (as we are told), not just out of respect for voters, but to simply get on with our life, our work, the business, and work with the hand we’re dealt with.
However, there is no reason to believe the sky is now and different colour. It is still blue. “Nothing’s changed !”
It was clear from the day after the referendum that a second vote would not be allowed by the incumbents’ in Westminster, despite our best attempts, and that it would be left for those who opposed to clean-up and make the best of a bad job. A “compromise was inevitable”, as you rightly said.
The extent of the compromise was the centre of debate.
Cleverly, with many a suggestion, reassurances, and even promises, the chosen compromise was left until the last second, during an international holiday, to deliberately avoid debate, scrutiny, and rejection; only to be accepted wearily and reluctantly, as “better than the alternative” cliff edge.
ALL reassurances, and promises stated, or implied, were conveniently ditched, without question. If anyone tried, the reply was and is “move on”, “the debate has been had, the people have spoken”.
You may recall discussions in the debates in 2016 about Goods and Services. It was clear then, that UK manufacturing’s value of exports was a small proportion of the EU’s manufacturers imports to the UK. The extent of the Financial Services traded was many times greater, and seen as a highly valued prize, the Crown Jewel one may say. (As seen by the EU, that is !)
The UK-EU trade agreement excludes Services, giving a whopping 10-NIL win. Well done Boris ! Brilliant goal. Pity it’s an own goal. Pity the rest of us!
“Move on !” Yes, of course, we have already, and have mitigated the damage as far as possible. But, the fall-out of the new trade rules, ie., the “paper-work” (Yes, it does require actual real paper ! The IT systems are not up to speed.) is only now becoming a reality. Not wholly unexpected, to be honest. Some did mention this, but were drowned out.
More and more will see the need to eliminate “unnecessary red tape and bureaucracy”. More will also feel it when they see the result of the Leavers strategy, and real reductions in job security and incomes. Dissent will start in pockets, from unsaleable langoustines, and the little matter of GB-NI-Eire trade, and travel, and family matters in general, and more “compromise” will be called for. Some Reality Checks will be demanded. The inevitable result will be a proper agreement. One fit for a developed country in the 21st century.
It will take time, unfortunately, especially when the voices of the 48% are not represented in parliament, yet. But, the changing of the guards is also inevitable, and necessary. Done well, it is a great spectacle. Same for a new UK-EU agreement in goods, services and free movement of people.
So while we “get on with it”, let’s also get back to reality and press for a new agreement !
The divide between us is neither here or there -What will play out is real -And both sides can have the luxury of saying either ‘your not working hard enough or ‘I told you so’ -More control(which was the starting reason for this experiment ) has the smell of less people controlling. If you are standing in a better Engineering environment in the future we can all say ‘We were brilliant’despite the hairpin bends that non Engineers seem to fit into our lives to make themselves more important than the smooth transition to an inevitable better world.
Sorry to dash your hopes Gerry, but ‘we’ never put any value on the ‘Development’ of R&D. Instead, we have a ‘world-leading’ knack for leaving commercialisation for the benefit of our less risk-averse (state sponsored) competitors, because we fail to protect our industrial IP. My 25-page submission to marine.energy@beis.gov.uk on 28 Sept. explains this incompetence..! “China filed 16,992 RE patents in 2018/19, the US 1,613 and the UK 84.” (Is China gaming the system?)
The Department for Business, Energy & Industrial Strategy labours under a delusion that (foreign!) “free enterprise” can deliver. It never will. The UK government has no credible Industrial Strategy fit for the next 5-10 years, never mind 2-3 decades ahead. We’re not even in contention for the long-distance race. China will win by miles, if we don’t protect AND manufacture our more innovative technology. (“A Journey of a Thousand Miles Begins with a Single Step” – attributed to Lao Tzu.) Take that first step in the wrong direction (HAWTs) and you’ll never get to where you want to be.
“Perhaps a greater threat to Arpa than Dom leaving Number 10 would be a broader retrenchment in public spending, post pandemic, which would render the R&D commitments null and void,”
https://www.researchprofessionalnews.com/rr-news-uk-politics-2020-11-departure-of-pm-s-chief-adviser-adds-to-doubts-over-uk-arpa/
“It’s clear that there’s a lot of political and promissory capital now invested in the idea, which it will be hard to row back. If the government sticks to its wider commitments to double public R&D spending by 2025, it will need some big ideas to spend the money on.”
It’s evident from the BEIS and EAC’s response to ‘Big Ideas’ that ‘we’ will never spend the money. It would contradict entrenched ideological dogma. (IP is none of the government’s business.) ‘Get Brexit done’ and ‘get ARPA done’ do nothing to stop the brain-drain of UK intellectual capital.
https://www.carbonbrief.org/in-depth-qa-how-does-the-uks-energy-white-paper-aim-to-tackle-climate-change
“The energy White Paper contains details about how the government wants the energy system to develop in the coming years.” They have NO idea WHAT they want, let alone what WE need. The dummies have failed to make even a simple distinction between ‘electricity’ and ‘energy’ storage.
Energy storage: The paper commits to legislating to define electricity storage in law, “removing another barrier to flexibility”. There IS no barrier – BGES eliminates electricity storage.
To cap it all, on 12 Jan 2021, at 10:48, the Environmental Audit Committee wrote:-
“When the committee released its call for evidence, it did not request intellectual property and it did not expect to receive any.” That ‘call for evidence’ was:-
“Technological Innovations and Climate Change: Tidal Power.” What ‘Innovation’ of any value did they expect to receive which would contain NO intellectual property?!?!
As I wrote to the EAC on 17 Dec. 2020. . . (requesting confidentiality.)
“The call for evidence is founded on a false premise that Tidal Power is disconnected from Wave and Wind Power! The prerequisite innovation for marine energies is Energy Storage. The efficient generation of electricity from all wind/wave and tidal resources is impossible without it. There’s no viable alternative – all 3 must be amalgamated into a single new industry, sharing common energy storage facilities. Simple, low-cost, durable, innovative standardised engineering transforms the TOTAL installed capacity of Marine Energy into flexible/base-load generation.”
The FOW industry is headed up the wrong (development path) creek without a paddle:-
“To unlock floating wind’s potential, ship yards in Korea, Japan and China require standardized solutions that support serial production and modularization for competitive, responsive project delivery. The term ‘constructability’ summarizes this need.”
https://www.dnvgl.com/expert-story/maritime-impact/Standardized-solutions-help-yards-achieve-cost-effective-floating-wind-construction.html#article-lightbox2
Unlocking floating wind’s massive potential depends upon its marriage to wave (and tidal) power. This demands that they ALL have integral BGES – Made in Britain. (and abroad, under licence.)
The BEIS should immediately reverse Alok Sharma’s decision to approve Hornsea Project Three. The taxpayer should not be subsidising the installation of a single offshore HAWT, let alone 2.4GW (at best, repowered in 30 years.) of these white elephant liabilities. If Ørsted are unable to cover the cost of energy storage, their technology can never be fit for purpose – period.
Has anyone actually counted the cost of providing 20GWh/year of battery storage?
https://www.energylivenews.com/2021/01/13/enough-wind-power-was-curtailed-in-2020-to-power-a-million-homes-for-a-year/
The CapEx of Before-Generator Energy Storage is ZERO, for technology that outlives batteries by a factor of at least ten times. BGES also has zero running cost.
1. Are you dead?
2. Anyone who isn’t dead, who will still be travelling to Europe (obviously, as its our biggest market) can see that once the a vaible alternative to UK supplier is found, then off the market will go to that supplier; inside the customs union.
3. Demongraphics and Geography are immovable objects (or not at speed!), hence yes, we will move closer to Europe in many capacities. Partly because if nothing else, the working age want in.