What the end of frictionless trade with the EU means for UK manufacturing

Posted on 11 Feb 2020 by The Manufacturer

Automotive, food and beverage, and chemical manufacturers could suffer “significant” disruptions when frictionless trade with the European Union comes to an end in January 2021.

Forklift handling container box loading to truck in import export - image courtesy of Depositphotos.
From January 2021, all traders will have to submit to customs checks, regulatory standards and food safety measures before entering the UK

With the introduction next year of importation checks at the UK border, including customs declarations and mandatory safety and security certificates, trade goods and services coming from the EU will not pass through to the UK without stringent scrutiny, potentially causing harm to the operations of key sectors in UK manufacturing.

These new measures, which are the opposite of those proposed under a no-deal Brexit, were announced in the first official confirmation by de facto PM Michael Gove at a Border Delivery Group event in London.

From January 2021, all traders will have to submit to customs checks, regulatory standards and food safety measures before entering the UK. These will be imposed on ferries crossing the English Channel and vehicles coming through the Channel Tunnel – the very facilities designed to minimise importation checks at the UK border.

New customs infrastructure and systems, as well as staff, and veterinarians for products of animal origin, will have to be introduced by the government by the end of the year in order to minimise any disruption to the flow of goods to the UK from the continent.

Car and chemical manufacturers, and food distribution firms, which rely on the free flow of goods to meet just-in-time delivery and supply demands, could face delays as a result of the new measures and incur costs as they navigate the new bureaucratic system.

Brexit - United Kingdom and European Union - image courtesy of Depositphotos.
“Some will benefit, some won’t” – Sajid Javid

Speaking to Chancellor Sajid Javid’s statement earlier this month to EU finance ministers at the Economic and Financial Affairs Council that the UK’s divergence from EU regulations after Brexit will have an “impact on business one way or the other; some will benefit, some won’t,” the Society of Motor Manufacturers and Traders (SMMT) said any disruption to the automotive industry’s complex cross-border dealings could cost “billions”.

If the UK government fails to implement “necessary” customs infrastructure from day one, UK consumers could see “significant” disruption to goods, especially in fresh fruit and vegetables which will perish at the border if delayed for too long, according to the British Retail Consortium.

Lighter trading arrangements are also expected to be introduced on goods coming across the Irish Sea, according to Mr Gove – in contrast to more robust checks between Great Britain and Northern Ireland announced last week by ferry operator Stena Line.

Mr Gove’s announcement of border checks is the first confirmation of its kind, going against that which leaders in car making and the agricultural industry have warned of and been opposed to since the 2016 referendum.

If our trading conditions are uncertain…

“We need a deal. No deal would be a disaster. The challenge that would befall, especially the UK [car] industry in terms of tariff impacts, in terms of potential delays at borders, in terms of regulatory change, additional cost, collectively would seriously undermine the viability of the UK automotive industry,” said Mike Hawes, chief executive of the SMMT, speaking to The Manufacturer.

“If our trading conditions…are uncertain and ultimately more negative than they are now, then there’d be a real challenge to maintain…competitiveness.

“The government says there is an 80% positive chance of goods moving freely at the border, but even if we get 95% of goods flowing freely into the country, if that other 5% contains automotive components, we can’t make cars because you can’t make a car with 95% of the parts,” he added.

A view from a UK food SME

“As a company that exports significantly to more than 20 countries (some of which are in the EU), we desperately need communication from the government on what support they are going to provide to help with potential new regulations and procedures created by Brexit,” said Nimisha Raja, founder of Sittingbourne-based Nim’s Fruit & Veg Crisps, the UK’s only air-dried fruit and vegetable crisp manufacturer.

“Even if things go relatively smoothly [with Brexit], there will still be increased paperwork and new checks we’ll have to put in place, which is going to cost us money, money that could be better spent investing in new technology or marketing that will help us expand,” she added.