EEF, the manufacturers’ organisation, has issued a stark warning in a briefing paper published today and urges the government to clarify its position on the customs union and customs arrangements.
The organisation warns that a loss of access to both the single market and the customs union would condemn the manufacturing sector to a painful and costly Brexit and says that any suggestion that ‘no deal is better than a bad deal’ is simply unacceptable to an industry that accounts for 45% of all UK exports.
In the paper — UK Trade with the EU: a new trading order for the manufacturing industry — ten ways in which manufacturers would be negatively impacted if the UK walks away without a deal are highlighted. These include a loss of zero rate tariffs, changes to and potential loss of inwards processing relief, new non-tariff barriers such as custom procedures and higher compliance costs for any EU standards that change among others.
Unlike a typical free trade-type negotiation where walking away simply means the continuation of the status quo with neither party losing out, if the UK walks away with no preferential access to the EU or international markets in place it will finds itself at an immediate loss on day one of Brexit, states EEF. Further, the manufacturing sector will bear much of the brunt.
To mitigate the impact on UK manufacturing, the organisation 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.
"The EU is our sector’s single biggest trading partner in a complex, tightly interwoven trading environment. Undermining the building blocks of this relationship — the single market and the customs union — without any other supportive structure in place would undoubtedly hurt our industry and condemn us to a painful and costly Brexit,” said Terry Scuoler, CEO of EEF. “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.
“Close consultation between government and industry is now vital if we are to successfully deliver a deal that supports trade and minimises costs and uncertainty. Brexit will be the most complex unravelling that any UK government is ever likely to have to undertake and government will need the help of industry to identify, understand and mitigate the implications,” he added.
As with other industries, a transitional period is deemed to be essential to allow the sector time to adjust to such significant changes to the trading environment.