UK aerospace cluster warns of UK trade disruption after Brexit

16 / 08 / 2017

Trade bodies have responded to government plans to ask Brussels to establish a “temporary customs union” after it leaves the EU in March 2019.

UK aerospace trade association ADS has warned that UK government plans to leave the European Union (EU) customs union during a Brexit transition period “will raise concerns of unnecessary disruption to trade between the UK and Europe”.

UK freight forwarders would like to see more detail on the government's post-Brexit trade and customs arrangements.

The UK's Freight Transport Association welcomed the UK government’s position paper on post-Brexit trade and customs arrangements  as a “step in the right direction but added that the ambitions laid out in the document are far from guaranteed, and will require some careful negotiation.

Separately, UK-based business advisors and financial accountants MHA MacIntyre Hudson have also cautioned that UK businesses “should prepare for the worst” despite the government’s “bold approach” to Customs duty.

Britain’s £37bn turnover aerospace industry is second in size only to the US. ADS believes that the UK government’s proposal for a transition involving two stages: one from membership of the EU to new arrangements agreed for a transition period, and a second from the transition to a final post-Brexit deal, creates “unwelcome risks to business”.

The trade association for the aerospace, defence, security and space sectors wants to see a one-step transition to the UK’s new relationship with the EU, with UK membership of the customs union and EU regulatory bodies continuing unchanged during a transition period.

ADS chief executive Paul Everitt said: “The government and the EU must work together to minimise the business disruption from Brexit, both in the UK and in Europe. Our sectors are part of global industries, and rely on frictionless trade with our European partners and around the world.

“The best solution to protect UK competitiveness is to retain our current relationship with the EU during a transition period, giving businesses certainty that trade will not be disrupted and more time to plan for new arrangements after Brexit."

Everitt continued: “Today’s announcement starts to give industry more clarity and it is welcome that all sides involved in negotiations recognise a transition period will be needed.

“However, the Government’s plan for a two-stage transition creates risks for business. We believe that a one-step transition would minimise the economic disruption to business experienced during Brexit.”

Maintaining existing arrangements means UK businesses would continue to benefit from bilateral mutual recognition agreements, such as those between the European Aviation Safety Agency and the United States, Canada and Brazil.

Under the government’s proposed transition plan, agreements such as these would no longer apply to the UK, “potentially disrupting trade with export markets around the world,” said ADS.

Alison Horner, a Value Added Tax (VAT) partner at MHA MacIntyre Hudson, said: “[The] announcement is a very bold step from the UK government, especially given the EU’s public stance on the single market and the clear message that Brexit means an exit from the associated free trade arrangements.

“But the step is very much needed to get us to a workable transitional agreement.”

Horner continued: “Without decisive action, we appear to have only one outcome, defaulting to the World Trade Organisation’s (WTO) customs duty tariffs. The government’s understanding of the practical implications of this outcome is finally becoming evident, which should be reassuring for businesses. 

“A Free Trade Agreement (FTA) is what all UK businesses who deal with European trade really want. It’s also better for UK consumers, who, without an FTA, could for example be faced with an additional 10% Customs duty cost when they buy a European car.

“Businesses trading with the EU may also encounter administrative snarl ups, similar to those seen recently with holiday makers at passport control in some EU destinations.

Horner concluded: “Today’s proposals are only a starting point and we think that the retail and motor industries in particular will lobby hard for a sensible agreement, as it affects both importers and exporters of goods throughout Europe.

“In the meantime, businesses should continue to assess the potential worst-case scenarios and review WTO tariff codes for their intra-EU supply chains, just in case.”