Manufacturers urge government to work more collaboratively with the EU

Britain’s manufacturers are calling on the UK government to help them ease continued difficulties with the new trading environment and relationship with the EU, which has ramped up costs, caused import and export delays, and is hampering smooth trade as companies struggle to recover from the Covid-19 pandemic.

In Make UK's report, titled 'Trade and Cooperation with the EU: Six Months On', the data collected showed that 96 per cent of companies said they have faced challenges since the start of the year with the new trading environment, with nearly half (47 per cent) citing early difficulties with customs processes. This has since eased, as companies’ understanding of the new rules improved.

However, over a third (36 per cent) - mainly small and medium sized companies - said they are still struggling with the new customs procedures and paperwork, with clearance across customs borders posing the greatest difficulty, and more than a quarter (29 per cent) said that demonstrating the origin of their products is a challenge.

New rules to prove the origin of a product were one of the last elements of the trade deal to become known, leaving manufacturers little time to prepare or understand the detail. Almost two in five manufacturers see 'Rules of Origin' as a key priority for further discussion with the EU, particularly looking to find a solution to the issue of goods that cross the UK/EU border multiple times during production as part of an integrated supply chain process.

The UK has 'taken back control' over legislation including employment regulation, environment and climate change and, critically for manufacturers, product legislation and rules. This is a growing concern for manufacturers who have already seen regulation around medical devices change in the EU in May, but UK law has not kept up, leaving UK companies at risk of not being compliant. Companies fear this “divergence by inertia” will spread and it is likely that future EU rule changes will also impact machinery and chemicals.

With business travel now beginning again after Covid-19, mobility between the UK and EU remains largely untested. A third of manufacturers surveyed said the government should look to improve mobility between the UK and EU to allow companies to deliver the service areas of their contracts. While Make UK welcomed the provisions for short-term business visits, including aftersales care such as installation and servicing of equipment, it said that this needs to be extended to cover contractors, which many manufacturers use to carry out these activities across the EU. Many companies admitted to not fully understanding the business travel rules for different EU member states.

Stephen Phipson, CEO, Make UK, said: “It is clear that much of the trade and cooperation agreement needs to be worked on further in order to smooth out continuing difficulties for both UK and EU companies in a number of areas including customs, mobility, legislation and standards.

“Government should also work with the EU to find a solution to the issue over origin of goods, which is proving extremely challenging for many companies, particularly where the UK and EU both have a Free Trade Agreement with the same third country. The UK and EU need to look at third-party cumulation across the UK-EU TCA [Trade and Cooperation Agreement], which would bring undoubted benefits for both sides of the equation.

“Similarly, it is important to smooth origin issues where goods go back and forth between the UK and EU several times during their production as part of the integrated supply chains built up over the past four decades of closer cooperation and trade with the EU.

“Moreover, we would urge the Government to think very carefully about the implications of any divergence from the current EU standards and rules to which we both adhere, and look to introduce a national interest test to assess the impact on trade and the economic benefits of any proposed changes before they happen.”

The vast majority of companies surveyed said they wished to see cooperation with the EU across a full spectrum of activities, while maintaining the right to take different paths if of economic and trade benefit to the UK. 86 per cent of manufacturers want the government to work with the EU to ease the difficulties around export processes and customs formalities.

Make UK is the representative voice of UK manufacturing, with offices in London, Brussels, every English region and Wales. It represents 20,000 companies of all sizes, from start-ups to multinationals, across engineering, manufacturing, technology and the wider industrial sector.

Inevitably, the seismic upheaval of Brexit looks likely to impact UK manufacturing for some time to come. The Society of Motor Manufacturers and Traders (SMMT) has been particularly vocal about the impact of the changes, with UK car production slumping to levels not seen for nearly 40 years.

Coronavirus undoubtedly played a big part in the car industry's total turnover loss of £20.4bn in 2020, although the ongoing uncertainty around trade with the EU continued to drag the sector down.

Meanwhile, science and research is another area of concern, with universities reportedly ‘alarmed’ by the government’s silence on future funding for the UK's continuing involvement with key pan-European science and innovation schemes.