How does Govt’s Brexit white paper affect manufacturing?

The long-awaited Brexit white paper has been published by the government, stressing that Britain cannot have it all when it is to leave the EU next March; but what does this mean for manufacturing?

The Brexit white paper follows an expected route for UK manufacturing, similar to what the government has recently been advocating; how free trade between the EU and UK is to be protected with “frictionless” trade, and that free movement – which currently allows unlimited immigration to the UK from the EU – will be restricted.

Brexit white paper aims to keep trade “frictionless” by:

  • Zero tariffs across goods, with no quotas
  • No routine requirements for rules of origin between the UK and EU
  • Arrangements that allow cumulation with current and future Free Trade Agreement (FTA) partners with a view to preserving existing global supply chains. This would allow EU content to count as local content in UK exports to its FTA partners for rules of origin, and UK content to count as local content in EU exports to its FTA partners.

The common rulebook

The rulebook is be proposed in order to reassure the UK and the EU that goods in circulation in their markets meet regulation
The rulebook is be proposed in order to reassure the UK and the EU that goods in circulation in their markets meet regulation.

Manufacturing will, according to the Brexit white paper, adhere to a “common rulebook” which the government believes will mean that British manufacturers only “need to undergo one series of tests in either market, in order to place products in both markets.”

The rulebook is to be proposed in order to reassure the UK and the EU that goods in circulation in their markets meet regulations, and in creating this rulebook it would remove the need to undertake further checks at the border.

It would also – according to the paper – allow operations between British and EU supply chains to remain efficient, and crucially avoid the need for manufacturers to separate production lines for markets.

In theory, the rulebook would allow British manufacturers to continue to trade with few restrictions, but it is whether this can be implemented and who will actually oversee its regulation remaining the key question.

The rules proposed would allow the British Standards Institution (BSI) to retain its ability to apply a single standard testing, so where a voluntary European standard is used to support EU rules, the BSI would not be able to put forward any competing national standards, ensuring consistency between UK and EU standards.

Positive reactions but concerns from manufacturing companies 

Adam Cunningham, managing director of Muller Redditch, a leading precision machining specialist said to The Manufacturer: “Any manufacturer who exports to the EU and further afield will be pleased to see frictionless trade feature so prominently, and this is something we would encourage the government to really champion.

“I dare say our competitors in Europe would probably feel the same, especially if a large number of their components are being shipped to the UK.”

2017 was marked by many highlights, long standing challenges and opportunities for the UK economy - image courtesy of Depositphotos.
Manufacturing will, according to the Brexit white paper, adhere to a “common rulebook” . – image courtesy of Depositphotos.

The company currently exports – directly and indirectly – 70% of its annual turnover; Cunningham added on regulations:“More importantly for our business, I am very encouraged to see BSI will continue to follow EU regulations, which should, in turn, mean our quality certifications (ISO and IATF) will still be valid and of interest to our international customers.

“If this was not the case, it could be a major stumbling block and could certainly impede our ability to supply parts to existing and future customers.”

Speaking to The Manufacturer, founder & CFO of London-based international clothing manufacturer, Hawthorn, Rob Williams commented: “The main thing to take away from this white paper is the point about zero tariff trade for manufactured goods between the UK and EU post Brexit.

“Presently our business is structured in such a way that we export manufactured goods from the UK to other production sites which are situated in the EU.” He explained on the implications of if tariffs are imposed for UK exports, Williams said: “It would be more economical to send these goods to other production facilities we have which are based outside of the EU, thus taking trade away from the EU.”

He concluded: “If tariffs are imposed then the only outcome of that would be consumer price increases, as UK based companies see increases in their manufacturing costs.”

CEO of fencing manufacturer Jacksons Fencing, Peter Jackson said: “As a Kent based manufacturer, port delays leading to gridlocked motorways will bring logistical challenges around being able to deliver on time. I’d like to see government support and detailed Brexit contingency planning to support the smaller firms keeping millions in work across the country.

“Many of our raw materials are imported from the EU and we have close export relationships with several European countries, so any cost fluctuations will impact our business. This will be the same for other manufacturers too. Ideally we’d like things to stay as close as possible to the way things are today. However we’re so confident the UK will weather any post-Brexit storm, we’ve made a significant investment in our manufacturing plant near Ashford.”

Chemical reaction

In products where more complex testing is required, for example the chemical or pharmaceutical industries, the white paper proposes to ensure these products only go through one method of testing.

Some of these regulatory bodies that the UK is “seeking participation” with include; The European Medicines Agency (EMA), the European Chemicals Agency (ECHA) and the European Aviation Safety Agency (EASA) , this will be essential in ensuring trade is not disrupted for these sectors.

The Brexit white paper will keep trade "frictionless" by introducing zero tariffs across goods, with no quotas.
The Brexit white paper will keep trade “frictionless” by introducing zero tariffs across goods, with no quotas.

Daniel Marr, head of marketing at global chemical manufacturer, Airedale Chemical, said to The Manufacturer on the potential impacts of the Brexit white paper for the chemical industry.

He said: “It’s a positive sign that the UK is hoping to maintain a strong relationship with ECHA [European Chemicals Agency] in order to help limit the testing of products; this helps businesses like us at Airedale Chemical ensure investment in legislation to date has been valuable.

Marr spoke about heightened legislation for the chemical industry and how further testing would be detrimental to the sector, he said: “Our industry is already so highly regulated, and rightly so, that introducing barriers such as testing products separately in the UK and EU could be detrimental to firms of our size.”

He concluded: “With Brexit impending it’s absolutely crucial at this stage that continuity is key to help ensure UK firms are not hindered in a wider European or global market.”

The Manufacturer has previously analysed some of the impacts of potential Brexit outcomes, with British companies in limbo and demanding clarity over the unclear EU referendum advancements.