Earlier this month the UK government published its long-awaited Brexit White Paper, “The Future Relationship between the United Kingdom and Europe”[i]. It details the UK government’s vision for the future relationship between the UK and the EU-27, which it describes as the “Future Framework”. 104 pages in length, the White Paper is split into four chapters: economic partnership, security, cooperation and institutional arrangements. Let’s take a look at some of the key areas that could impact UK manufacturing:

Free Trade Area for Goods

“The UK proposes the establishment of a free trade area for goods… The UK and the EU would maintain a common rulebook….. with the UK making an upfront choice to commit by treaty to ongoing harmonisation with EU rules on goods”

This UK-EU goods trade “common rulebook” would remove the need for time-consuming standards checks on industrial components and products upon crossing the border. The White Paper also proposes to remain within the EU’s VAT regime, for the same reasons. It would also allow UK-EU supply chain operations to continue working with efficiency, removing the need for manufacturers to separate production lines. In principle, the rulebook could enable UK manufacturers to continue trading with few restrictions; however, question marks remain over its execution and management.

Greater Regulatory Control

“In some manufactured goods sectors where more complex products have the potential to pose a higher risk to consumers, patients or environmental safety, a greater level of regulatory control is applied.”

The White Paper confirms that the UK will seek to join the European Aviation Safety Agency, the European Chemicals Agency and the European Medicines Agency, and refers to manufacturers of highly regulated goods. It means UK businesses would have to accept the jurisdiction of the European Court of Justice if it were to sign up and would have no voting rights on how these agencies conduct their business. UK manufacturers would also have to make financial contributions to the agencies.

Ending of Free Movement

“It would end free movement, taking back control of the UK’s borders”

Although the White Paper talks about new mobility plans, it emphasises repeatedly that the free movement of people will come to an end. This means UK manufacturers will need to consider how new immigration requirements might impact workforce mobility, access to skills and talent, and ultimately the cost of labour. Although there is little further detail on how migration arrangements might work post- Brexit, officials have indicated that the notional cap on net immigration at 100,000 a year will remain after the UK’s departure[ii]. A new white paper has been promised in the autumn that will contain more information on this area, following July’s release.

These are just some of the areas that may impact the future of UK manufacturing. Although the White Paper is subject to further change, one thing is certain: Brexit should be systematically evaluated, managed and, if necessary, mitigated. Over time, it may be necessary for UK manufacturers to rethink business models, but for now, all we can do is stay tuned for what’s to come.

 

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[i] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/725288/The_future_relationship_between_the_United_Kingdom_and_the_European_Union.pdf

[ii] https://www.theguardian.com/politics/2018/jul/12/brexit-white-paper-seeks-free-movement-for-skilled-workers-and-students