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Manufacturers in industrial product supply sector want ‘continued regulatory alignment with the EU’

An overwhelming majority of UK industrial product manufacturers want continued regulatory alignment with the EU after Brexit, a new industry survey has revealed.

Responding to a survey by the advisory body EURIS and independent experts at The UK Trade Policy Observatory (UKTPO), 83% of industrial product manufacturers support continued regulatory alignment in order to remain competitive in a global market with respondents overwhelmingly saying they see no benefit in moving away from the EU regulatory system for industrial and manufactured products.

UK companies told the survey that their supply chains have already been disrupted by post-referendum currency changes and that EU27 companies have started to select non-UK suppliers amidst the ongoing uncertainty of post-Brexit arrangements.

Industrial manufacturing representatives are calling for a Withdrawal Agreement to be reached with the European Commission at the earliest opportunity to give clarity to industry; they warn that a no-deal Brexit will cause severe damage and must be avoided.

The survey results are published today in ‘Securing a competitive UK manufacturing industry post Brexit’, a report on the impact of a no-deal Brexit on the industrial product supply sector by the University of Sussex-based UKTPO and EURIS, which represents companies with a collective turnover of £148 billion and with 1.1 million employees.

EURIS notes that the negotiations on the future relationship between the UK and the EU27 are the most important for its members since the formation of the single market in 1993. The advisory body warns a ‘no deal’ outcome would have lasting impacts on the industrial product supply sector, and its ability to contribute to the UK economy. This report provides specific information and guidance on the significant dangers of the ‘no deal’, and the opportunities that a ‘business friendly’ deal will bring.

Key findings in the report include:

  • EU Regulation enables industry to remain competitive in a global market. 83% of survey respondents support continued regulatory alignment with the EU. Product regulation has a critical role in ensuring that a high standard of safe and compliant goods are placed on the EU market. There is no benefit in moving away from the EU regulatory system for industrial and manufactured products.
  • Imports account for over half of total costs for 44% of companies. Any increase in barriers to trade will have significant impact on the UK’s global competitiveness. Our competitive advantage in non-EU markets depends on the UK having barrier free-trade for intermediary products and components with the EU. Notably, 52% of EURIS survey respondents stated that over half their sales were intermediate inputs for other companies.
  • The longer the uncertainty over the Brexit process continues, the more long-lasting damage will be incurred by our businesses. EU 27-member states have been warned to ‘prepare for the worst’ and review their supply chains. For most companies changing suppliers is a significant decision, and one very rarely reversed and some EU27 companies have already started to select non-UK suppliers. One third of EURIS survey respondents are already thinking about or have already changed suppliers due to Brexit – sales have already been lost.
  • It is not a choice of exporting to Europe or the rest of the world. If we become less competitive in the EU we will be less competitive in other international markets. The UK Government’s target to develop stronger trading relationships with other non-EU countries is a positive move, but this can only be achieved if we maintain a strong alignment with EU regulations and supply chains.

Other key conclusions from the survey include:

  • Four in ten companies say they will face a skills shortage without EU workers.
  • 15% of firms believe even a two hour delay at customs would impose additional costs on their business
  • Just 4% of respondents had no concerns about any element of Brexit impacting their business.
  • Approximately 1/3 of respondents have already seen a fall in investment due to Brexit with only 2% reporting an increase.

Dr Howard Porter, EURIS Chair, said: “Our industry needs clarity and a Withdrawal Agreement confirmed with the European Commission in the Autumn. As this report and our member survey clearly show, further delays and the risk of no-deal will result in significant long-term damage to the UK manufacturing sector and will put at risk the industrial product supply sector’s £148 billion contribution to the UK economy.”

Professor L Alan Winters, Director of the UK Trade Policy Observatory, said: “The challenges of a ‘no deal’ Brexit have been much discussed, including by the UKTPO, but this survey brings them to life. This critical sector is already starting to hurt and if its needs for frictionless trade with the European Union are ignored, a quarter of UK goods trade will be vulnerable to cuts. The threat to jobs is alarming.”

Mike Hughes, Zone President Schneider Electric UK & Ireland, said: “EURIS’ report ‘Securing a competitive UK manufacturing industry post Brexit’, highlights that the UK will always be closely tied to the EU as our primary trading partner. Our potential to develop trade links with non-EU countries is dependent on accepting this. As an industry, we believe it is essential that the UK maintains strong regulatory alignment for our sector with the EU, and continued membership and involvement in the creation of EU and International standards for the industry.” (Schneider Electric are a member of BEAMA who are a member of EURIS).

83% of British manufacturers ‘preparing for a hard Brexit’

A new report from Sheffield Hallam University and SSG Insight has found that 83% of British manufacturers are preparing for a hard Brexit and actively forging new relationships with ‘Rest of the World’ territories.

Nearly half of manufacturing companies have identified Asia (44%), as well as the Americas, Africa and the Middle East as focus areas for the future.

The proactive, global outlook is helping to cement what could be viewed as a bullish mood among British manufacturers about their prospects post Brexit, despite an expected dramatic drop in orders from EU-based countries.

This latest industry snapshot draws on extensive research amongst the UK’s leading manufacturing executives. The report, Harnessing Brexit, Technology and Insight: British Manufacturers, a Competitive Edge in an Age of Uncertainty and Opportunity, is co-authored by Dr Hongwei Zhang and Professor Sameh Saad from Sheffield Hallam University and Jon Moody of SSG Insight, an asset management company.

It discusses the optimism and concern around two of the most critical challenges facing modern Britain: Brexit and the relentless rise of technology, particularly in the form of Industry 4.0.

The report reveals that manufacturers are more than twice as likely to point to global competition than Brexit when asked what they consider to be the biggest challenge disrupting the industry, closely followed by the Internet of Things and capability to handle data from connected technologies.

With a requirement to scale up volume easily to meet demand from Rest of World territories, Brexit and the shift of focus beyond the EU is expected to accelerate the use of AI and automation on UK factory floors, driving down the cost of production and speeding up product development on the route to new markets.

As such, more than half (59%) of UK manufacturers are intending to invest in smart, connected technology to drive forward international growth. This compares to 20% planning to invest in machinery and hardware, 18% investing in research and development and 17% investing in sales and marketing.

Dr Zhang, principal lecturer at Sheffield Hallam University, said: “With numerous Brexit scenarios on the horizon and hard Brexit a very real threat, our research has found that Britain’s manufacturing sector is showing determination to remain resilient through this tumultuous period.”

Key recommendations of the report include:

  • Manufacturers should plan for the most disruptive Brexit outcome to mitigate the immediate structural changes triggered by the UK leaving the EU
  • Technology should be harnessed to ensure that British manufacturers compete and thrive with their new trading partners
  • Strategies for the continuous upskilling of employees should be developed to ensure British manufacturers keep pace with technological innovation

Jon Moody, chief product officer at SSG Insight, said: “It’s clear from our research that British manufacturers are resolute as the UK enters a new era. Although there are concerns over tariff rates and regulatory barriers, many are actively forging relationships with new territories throughout the world. A confidence is very much emerging from the uncertainty.”

Forwarders say Government statements on Brexit ‘leave questions unanswered’

The British International Freight Association (BIFA) has labeled the Government’s much talked about Brexit advice for companies as ‘patronising’.

In a statement, BIFA Director General Robert Keen said the freight forwarding industry was already well aware of the issues at stake, and instead needed more clarity on specific arrangements that will be put in place should a ‘no deal’ scenario occur.

He said: “As most of the visible trade that takes place between the EU and the UK is managed by freight forwarders and logistics professionals on behalf of traders, some of the content of the information could be considered rather patronising as those freight forwarders are already aware of many of the issues of concern to businesses trading with the EU in the event of no deal, says Robert Keen, director general of the British International Freight Association (BIFA).

“What BIFA members actually need is clarity on the arrangements that will be in place in the event of a no deal scenario.

“How will we deal with a massive increase in the customs entries that will be required in the event of a no deal; where will we source the huge number of extra staff that may be required to process such a large increase in entries on a new and as yet unproven computer system; where will HMRC source the extra staff that will be needed to process entries and expedite their training which would normally take up to one year, how do we deal with large increase in costs that our customers are unlikely to be expecting and might be unwilling to accept?

“These are just a few of the additional questions that today’s Government statement, which suggests that in a ‘no deal’ scenario full-blown customs controls will apply to two-way trade between the EU and the UK immediately, do not answer.

“BIFA has already been vocal on our concerns about the capacity and readiness of UK customs systems and port infrastructure to cope with that outcome.”

Brexit White Paper receives mixed response from supply chain sector

The White Paper outlining the UK Government’s proposed future relationship between the UK and European Union after Brexit has received a mixed, but mostly positive, response from leading supply chain industry figures.

The proposals include a facilitated customs arrangement, removing the need for customs checks between the EU and UK – a measure that, whether successful or not, has far reaching implications for supply chains across countless markets.

James Hookham, Deputy Chief Executive of the Freight Transport Association (FTA), said the solutions outlined offer encouragement for those tasked with keeping the nation’s complex supply chain moving freely, but will require a similar level of imagination and optimism from the UK’s European trading partners.

He added: “[The] White Paper includes positive proposals for many areas which have caused concern for the logistics industry, and should give businesses, which have been worried about a lack of clarity over future trading arrangements, some level of reassurance. It is now Europe’s turn to step up and deliver a similarly supportive, encouraging plan which will minimise the barriers to continued frictionless trading arrangements as the UK leaves the EU.”

Robert Keen, Director General of the British International Freight Association (BIFA) expressed mixed feelings about its contents. He said: “The White Paper addresses some of the issues that BIFA has highlighted over the past two years, including retaining something as close to the Single Market and Customs Union as is possible, with positive ideas on future Customs matters and international trading arrangements.

“But we have to remember that nothing in the White Paper is cast in stone. The proposals on Customs, where the UK is proposing to apply EU tariffs to EU goods passing through the UK, while having the freedom to set different tariffs on goods entering the UK, look complex and untested, something that has already seen negative comment from the EU.

“Other than a facilitated customs arrangement, I suspect that there will be other areas where there will be differences of opinion between the UK and EU.

“Notwithstanding the above, it is the most comprehensive and cogent proposal put forward by the UK Government to date and is a useful basis for negotiation with the EU.

“However, we need to be realistic. It still has to get through parliament, even before the negotiations in Brussels.”

The UK Chamber of Shipping, meanwhile, has given the Prime Minister’s White Paper its seal of approval, and demanded the European Union now ‘gets serious’. Director of Policy David Balston said: “The Prime Minister is to be commended for this detailed paper which shows the government has listened to industry’s concerns.

“This vision for the UK’s future relationship with the EU is bold, comprehensive, ambitious and robust. It is good for both the UK and the EU economy; it guarantees both that the referendum result will be delivered, as well as the free flow of goods over national borders.

“Just as importantly, it will put the UK at the forefront of global customs arrangements, making UK customs processes streamlined not just for European trade, but for trade with countries around the world – allowing the UK to further develop its status as a global trading nation.

“It is time now for the EU to get serious and stop being prisoner to its own dogma. The UK is being constructive, collaborative and realistic. If the EU dismisses these proposals, as it has previous iterations, or tries to push the UK even further, then the risk of a no-deal Brexit will rise dramatically. If that comes to pass it will be because of their own intransigence, and they should be under no illusions: a no-deal scenario would significantly damage the European economy as well as the UK’s.”

CILT warns of freight concerns over Brexit preparations

The Chartered Institute of Logistics & Transport has responded to The Transport Select Committee’s inquiry into the effects of Brexit on UK freight operations.

The Institute’s response has been led through its Freight and Logistics Policy Group, with a detailed submission that will contribute to Parliamentary understanding of the fundamental role freight and logistics will play in supporting the UK economy in a post-Brexit world.

The submission highlighted the work of CILT on Brexit, supported by a series of roundtable discussions with officials from the Department for Transport, HMRC and DExEU. CILT has stressed to Government the need to promote the preparatory steps operators, their customers and the Government should take ahead of the UK’s exit from the European Union.

This work with Government has made it clear that the impact of Brexit on freight is dependent on the detailed conditions relating to border management processes and employment.

CILT has stressed to the committee that its terms of reference, which specifically exclude border or customs arrangements, were limiting. The Institute divided its comments between post-Brexit international supply chains and domestic operators, and presented evidence that nearly 40 per cent (400 million tonnes) of the goods moved within the UK are either imported or exported. If these import and export chains are disrupted then shippers will look for alternative routings and sources based on economic or service conditions.

Under the worst scenario of a hard Brexit, CILT observed that there would be:

  • An increase in unaccompanied trailer movements between the UK and Europe
  • An increase in deep sea port activity
  • Increases in stock and warehouse requirements
  • A reduction in foreign vehicles operating in the UK

CILT’s Freight and Logistics Policy Group believes that all of these changes require capacity that may not exist in the market today, and will constrain highly agile operators from responding economically; in turn, threatening consumer and industrial prices.

The Institute understands that 60 per cent of tonnes that move solely within the UK will not be as challenged in a post-Brexit world. That activity is represented by more than 400,000 HGVs and another one million vans. However, the biggest threat to these movements is the availability of staff for the vehicles, the warehouses and distribution centres. A consequence of the pressure put on the workforce will be the need to invest in automation. CILT is clear that the Government should promote and incentivise such investment.

Finally, the Institute underlines the need for the UK to remain strongly aligned with EU regulations on vehicle and equipment standards to facilitate inter-operability. But this should not be a slavish adherence where alternative regulation could encourage innovation and productivity within the UK.

Daniel Parker-Klein, Head of Policy at CILT, said: “Preparing for Brexit is key to the success of the UK’s freight sector. We have worked extensively to engage with Government officials to understand the threats and opportunities that will arise after Brexit. The Institute is clear that companies and government must plan and rehearse for a variety of scenarios in order not to risk economic damage during transition.”