Brexit: New rules to make for more costs than benefits

Posted on 11 Apr 2018 by Jonny Williamson

Diverging from European Union rules after Brexit will make majority of UK businesses less globally competitive, a report has shown.

Post-Brexit uncertainty is causing businesses to pass the increase in costs incurred as a result of supply chain challenges on to consumers - image courtesy of Depositphotos.
Diverging from European Union rules after Brexit will make majority of UK businesses less globally competitive – image courtesy of Depositphotos.

In a CBI survey of 23 industry sectors, the vast majority of businesses preferred to continue close alignments with EU regulations.

Only agriculture, shipping and tourism might benefit, but this was ‘vastly outweighed’ by the impact on other sectors, the report has shown.

CBI director-general Carolyn Fairbairn warned at the launch of a new CBI report on EU rules that matter for the UK economy: ‘The task of unpicking 40 years of economic and regulatory integration is complex and colossal.”

The report ‘Smooth Operations’ is based on thousands of conversations with UK businesses, as well as dozens of leading trade associations, and provides an A to Z of the rules that will matter after the transition period.

From architects to zoos, it outlines the regulatory needs of 23 industry and service sectors, of which 18 prefer convergence or alignment for the majority of regulation that matters.

The CBI study, compiled over a six-month period, says Brexit presents opportunities for rule changes in sectors such as agriculture, shipping and tourism that could ultimately benefit the British economy and consumers.

However, the report adds that opportunities for divergence are vastly outweighed by the costs of deviating from rules necessary to ensure smooth access to the EU market.

Another important finding is that changes to rules in one sector have significant knock on effects for companies in other sectors and throughout supply chains.

The main regulatory needs of the aerospace sector are:

  • To protect consumers and supply chains, UK negotiators should seek to agree full convergence between UK and EU rules on the aerospace sector. These rules are primarily under the safety regulatory framework of the European Aviation Safety Agency (EASA)
  • The UK should also continue to play a role in EASA’s regulatory-setting processes
  • Convergence with other important rules for manufacturing – such as REACH regulation on chemicals – will matter to the aerospace industry throughout the production process
  • These rules are equally important for the Defence industry which also undertakes a lot of advanced manufacturing that relies on specialised supply chains that criss-cross borders. Alignment with rules to ensure goods and services can move easily across borders is therefore vital.

George McFarlane, CBI Sector Development Director, said: “This report comes from the heart of British business. It provides unparalleled evidence to inform good decisions that will protect jobs, investment and living standards across the UK.

“The experience-based evidence of companies across the country will be essential in the months ahead, as it is critical that negotiators understand the complexity of rules and the effects even small changes can have.

“The UK is a world leader in the aerospace industry. From design to technology, and apprenticeships to research and development investment, the sector contributes significantly to the UK’s economy, generating £32bn a year.

“Convergence with EU regulation in this sector is vital for the UK to continue to be a world player in the aerospace industry, to preventing disruption to trade, and to the smooth running of Europe-wide supply chains.”

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