Loss of access to the single market and the customs union will condemn the UK manufacturing sector to a painful and costly Brexit, industry body EEF has warned.
In a briefing paper published today (27th March) the group says that any suggestion that ‘no deal is better than a bad deal’ is unacceptable to an industry that accounts for 45 per cent of all UK exports.
Urging the government to clarify its position on the customs union and customs arrangements, EEF says that should the UK walk away with no preferential access to the EU or international markets in place it would immediately find itself at a loss, with the UK’s manufacturing sector bearing much of the brunt.
The sector would be particularly vulnerable because the UK is currently the 9th largest industrial nation in the world, but its strength is underpinned by its trading relationship with the EU – 52 per cent of all manufactured exports by value went to the EU in the 12 months to April 2016.
The sector’s trading relationship with the EU is tightly interwoven and complex pan-European supply chains are commonplace, with some EEF members reporting that their production processes criss-cross European borders numerous times.
The briefing highlights ten ways in which manufacturers would be negatively impacted if the UK walks away without a deal, including the fact that average tariffs for manufacturing exports to the EU could be expected to increase by approximately 5.3 per cent.
- Loss of zero rate tariffs
- Reverting to higher WTO tariffs for exports
- Potentially higher WTO tariffs on imports, including component parts from the EU
- Any UK tariff reductions would have to be offered to the rest of the world
- Changes to and potential loss of inwards processing relief
- Changes to customs warehousing arrangements
- New non-tariff barriers such as customs procedures
- Having to meet non-preferential rules of origin for exports to the EU
- Higher compliance costs for any EU standards that change
- Loss of preferential arrangements with third countries under current EU FTAs
- To mitigate the impact on UK manufacturing, EEF wants the government to engage in close consultation with industry to set out the general approach, determine the right objectives and identify commercially significant issues spinning out from the negotiations.
As well as prioritising WTO membership, the body asserts that when leaving the single market key trading conditions must be maintained to ensure certainty and minimise costs. Any new customs arrangements must maintain frictionless trade by preventing both tariff and non-tariff barriers from springing up and ensuring the UK can strike trade agreements with the rest of the world.
Terry Scuoler, CEO of EEF, said: “The EU is our sector’s single biggest trading partner in a complex, tightly interwoven trading environment. ….The idea of being able to walk away empty-handed might be a negotiating tactic, but it would, in reality, deliver a risky and expensive blow. The rhetoric from the UK Government needs to focus instead on achieving a deal that will work for the UK and the EU.”