[ad_1]
Sector leaders advocate a range of feasible solutions, some of which the Government could introduce unilaterally in the short term
September 4, 2023 12:09 pm
It’s no secret that the Trade and Cooperation Agreement (TCA) – the main agreement governing post-Brexit trade between the UK and EU – is not fit for purpose. Its inadequacy is costing us around 4 per cent of GDP every year, restricting investment and increasing costs for businesses in almost every sector.
Sadly there is little chance of a significant renegotiation in the short term. With both UK and European Parliament elections next year, few expect imminent major change, even if a more ambitious agreement appears inevitable in the medium term.
This delay matters for many important parts of the UK economy – manufacturing a key example. In our conversations with leaders in the manufacturing sector this year – including sector bodies like MakeUK, large multinationals with bases in the Midlands and North East, and small businesses across the country – we have learned about the huge increased costs manufacturers face to produce, export, attract investment and recruit skilled workers.
All of this has real world implications that go beyond one business or even the sector as a whole. Every business that finds it hard to survive or thrive means jobs that aren’t created or are lost. Every small or medium business that goes to the wall is not only a tragedy in itself but also a “what if” – we will never know which of these lost opportunities could have become a big player of the future.
The good news is that the sector can be helped – both in the short term through unilateral government action and in the medium term through the negotiation of a deeper agreement with the EU. Leaders in the sector have done the work to develop ideas which would improve their situation – they simply need politicians willing to listen and act.
Our new report explains how the nature of our departure from the EU placed these near-impossible constraints on UK manufacturing. It sets out the sector’s plans or change in detail – providing a road map for politicians to follow. It makes clear that urgent action is required. The longer the Government delays, the more harm is done – and the greater the rescue job any future government would face to bring the sector back from the brink.
Manufacturing is no small player. Despite a widespread perception that the UK is a post-industrial society, manufacturing still plays a huge role. It accounts for 2.5 million jobs, 51 per cent of goods exported and 15 per cent of all investment. Its survival and ability to thrive is essential for many of our less wealthy regions, including the North East, Wales and the Midlands. Its viability is essential if we are to successfully manage the transition to clean energy, transport and construction. Risking its survival or ability to grow and innovate is simply not tenable.
Yet the non-tariff barriers resulting from the UK leaving the EU single market and customs union are extensive and damaging – and cause most harm to small and medium enterprises. The sheer volume of new administrative and bureaucratic requirements makes it harder and more costly to manufacture.
One manufacturer described having to set up 27 new bank accounts to deal with the VAT requirements of each EU member state – possible for the big players but simply not feasible for the smaller businesses which make up the bulk of the sector.
At the heart of this, many in the sector believe, was a blindness among those who negotiated the TCA of the realities of modern manufacturing. Gone are the days where individual companies would manufacture a product from beginning to end. Modern European manufacturers source parts and expertise from across the continent – facing cost and practical barriers to accessing this network of goods, parts, innovation and expertise is costing the sector dear.
The Government has failed to recognise the lead times involved in complex supply chains and in both maintaining and developing manufacturing processes. Right now there are clear examples of the lack of clarity over UK policy in the latest round of EU Russian sanctions and the Carbon Border Adjustment Mechanism, as well as the changes to rules of origin enshrined in the TCA. The administrative and actual costs of rapidly trying to conform to these will cause further damage to manufacturing exporters and importers – including to the critical automotive export sector.
Manufacturing leaders are clear that the impact of the TCA on the sector and the wider economy is severe and is only likely to worsen unless remedial action is taken. They describe impacts on productivity and wages and believe it has made the UK less competitive. This is “putting off potential EU investors and employers” and leaves “the manufacturing industry limping”. They highlight chronic labour shortages and the impact of ongoing investment uncertainty.
Many believe the Government has made the impact worse through its failure to have a clear vision of how to support the sector post Brexit. A prime example has been the now all but abandoned introduction of the UKCA mark. Companies spent millions of pounds and countless hours trying to conform before the Government announced its indefinite postponement for most sectors.
Sector leaders advocate a range of feasible solutions, some which the Government could introduce unilaterally in the short term, others which would require further negotiation with the EU.
Liberalising labour mobility and extending tariff exemptions to electric vehicles are essential in the short term. Many advocate joining the Pan-Euro-Mediterranean (PEM) Convention which enables diagonal rules of origin cumulation between the EU, Turkey and most other European nations. Joining PEM would significantly reduce rules of origin costs and challenges and – as a non-EU body – presents no rolling back of Brexit.
Sector leaders further suggest new solutions on safety markings, international legal disputes, and chemicals regulation. These would all be highly impactful while being politically achievable.
We hope that the Government takes account of the urgent demands for action from sector leaders. They are asking for nothing more than the Government to be true to its word – supporting UK businesses and intent on supporting productivity, growth and employment. The alternative is more lost opportunity, lost or constrained businesses and ongoing cost to the UK manufacturing sector. They need what businesses always need – a clear time-phased plan that recognises the reality on the ground and provides the basis for investment and commitment.
Our report aims to map out that plan in the hope that Government will work with the sector to protect its present and future, ensuring no further harm comes to manufacturers who contribute so much to GDP and our trade balance – to enable those manufacturers to continue to deliver growth and wellbeing to the British economy and people.
Mike Buckley is director of the Independent Commission on UK-EU Relations
[ad_2]
Source link