Page 10 - Industrial Technology January 2020

INDUSTRY NEWS

COUNTING THE COST OF

A REPORT FROM MAKEUK IN PARTNERSHIP WITH SQUIRE PATTON
BOGGS HIGHLIGHTS THE COST TO INDUSTRY OF THE BREXIT DELAYS
OVER THE PAST THREE YEARS, AND WARNS THAT WE ARE NOT OUT
OF THE WOODS YET, WITH KEY QUESTIONS REMAINING UNANSWERED

he sizeable conservative majority in the General manufacturers are reportedly being asked to meet any
Election has removed the immediate threat of a potential financial implications, such as increased tariffs,
no-deal Brexit, and should signal an orderly should they materialise in the course of a contract. All this
Twithdrawal on 31 January. But with Boris adds up to halted or diverted investment hampering the
Johnson committed to ending the transition period at the present and future growth of UK manufacturing.
end of the year whether a trade deal is in place or not, the The lingering threat of no-deal has been enough to lose
threat of a no-deal Brexit lingers. The reality, therefore, is customers and cut jobs. A number of manufacturers are
that manufacturers must prepare – those who have taken downsizing or completely shutting down in the UK. Even
steps must ensure they remain prepared, and those who the most profitable market leaders are suffering. But, more
have more to do should do it now. alarmingly, UK manufacturers overwhelmingly believe
The EU has been our largest and most integrated trade there is more custom to be lost in the event of a no-deal
partner for decades. Extracting ourselves from this Brexit, with just 2% believing that a hard exit could
partnership in a way which protects the UK’s increase the appetite of EU businesses to deal with UK
manufacturing sector requires significant further companies. staff with customs experience. This creates a barrier to
Government engagement, investment and time. With preparedness.
manufacturers’ confidence in the overall economy down Customs processes As a basic starting point, all businesses must have an
by almost half over recent months it is clear that Preparing to send and receive goods between the UK and EORI number to identify them and record their exports
manufacturers are not optimistic about our economic the EU post-Brexit means more than just import duties: it and imports. As of June 2019, fewer than one-third of
future. will mean complying with processes, leading to eligible UK manufacturers had successfully been issued
Some 64% of manufacturers say Brexit delay and bureaucracy, delays and further costs. And while the with their EORI number. And fewer than 30% of
uncertainty has had a directly negative impact on their Government has encouraged businesses to prepare for a manufacturers have applied to adopt a customs special
company’s profit margin in the past two years. And almost no-deal Brexit, evidence shows that there is more to do. procedure to help with cashflow or mitigate against import
half of manufacturers have already experienced a All exports (and imports) that are commercial in nature duties. The uptake of Authorised Economic Operator
noticeably negative change in EU customer and supplier must be declared to customs and require an export (AEO), also known as Trusted Trader, status has, however,
appetite towards doing business. Further, some declaration; in a no-deal Brexit scenario it is anticipated increased recently. After 11 years of slow growth since its
that there would be a fivefold increase in the number of introduction, numbers have increased by 50% in the past
declarations, from around 55 to 275 million, being made
six months. Holding AEO accreditation puts a business in
“ each year. Businesses need to decide whether to complete the best possible position for facilitation by HMRC and can
assist in quick clearance of goods at the border.
the additional customs documentation themselves or to
UK BUSINESSES EXPORT A
outsource it. Owing to the current Brexit uncertainty, many Then there is Transitional Simplified Procedures (TSP)
TOTAL OF £228BN OF GOODS manufacturers are understandably cautious about which allows importers to defer giving a full declaration
AND SERVICES TO THE EU investing significantly in training or taking on additional until after the goods have crossed the border, and to pay
ANNUALLY. THE HIGHEST VALUE any duty owed a month after the import. Despite these
Destination of UK services exports. Source: OECD EBOPS services benefits, fewer than 10% of eligible businesses had
ITEMS ARE KEY ELEMENTS OF trade database, CEPII GeoDist database registered for TSP status by the end of May 2019.
THE MANUFACTURING SECTOR

UK goods exports to the EU, 2018.
Source: HMRC, UK Trade info
£ billions % of total
Petroleum, petroleum products 20.6 12.0%
Road vehicles 17.3 10.1%
Medical & pharmaceutical products 10.9 6.3%
Other transport equipment 9.1 5.3%
Miscellaneous manufactured articles 8.7 5.1%
General industrial machinery 6.9 4.0%
Electrical machinery & appliances 6.8 3.9%
Power generating machinery 6.3 3.7%
Clothing & clothing accessories 5.4 3.1%
Organic chemicals 4.5 2.6%

INDUSTRIAL TECHNOLOGY • January 2020
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