No deal a bad deal for UK manufacturing

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Is a ‘no deal’ trade scenario between the UK and EU a good deal for British manufacturing and UK Plc?

No, it is not.

The Brexit impact on defence and security 

Given the level of uncertainty we’ve already seen in the EU-UK Brexit negotiations, the likelihood of the UK being left without a deal with the EU, is still a possibility. While making it clear that a deal is top priority, the Government also stated that “no deal for Britain would be better than a bad deal for Britain”.

However, the British manufacturing industry and the 2.6 million people it employs believe that the UK cannot afford to walk away from the EU without a deal.

Britain is the 8th largest manufacturer in the world by output. The sector contributes 10% of UK output. The strength of our manufacturing sector is firmly supported by the trading relationship with the EU - with EU markets accounting for 48 per cent of manufactured exports in 2017 Q2. British manufacturing supply chains weave in and out of the UK and Europe in complex patterns. For many UK manufacturing companies that only trade with the EU, this is the only trading environment they’ve ever known.

Coming back to the Government’s stated position that “no deal is better than a bad deal” - in a typical free trade agreement negotiation, it is understandable for the negotiating partners to take this stance, as walking away from the table would leave them no better nor worse off. However, with the UK and EU relationship, negotiations are starting effectively at the other end. The UK and EU are already as aligned as they possibly can be, with free and open access and regulatory convergence. For the UK to walk away from this scenario without any agreement in place would result in the loss of all preferential arrangements, automatically reverting to basic international trading rules and minimal market access levels to not only the EU but countries with which the EU has special trade agreements with.

This will result in an immediate impact at the UK/EU border.

Free access to the EU single market and Customs Union has been important to British manufacturers and the most important facilitator of ‘frictionless’ trade with the EU. It has also promoted a high degree of competitiveness amongst UK exporters. Moving out of this arrangement - and suddenly - will incur significant costs. The manufacturing sector is working hard to understand, plan for and adjust to these changes.

What it needs however is a reasonable timeframe to adjust and deliver the changes to supply chains and business models in the most efficient and cost-effective way.

For this reason the UK manufacturing sector’s most urgent need is for agreement to a sensible transition period - to have time to avoid a no-deal scenario. Without a transition period that allows for business continuity, the UK risks being positioned at the point of no return, on a very certain cliff edge.



Trade Advisor

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