Brexit deal must leave no sector behind

21 December 2016

The UK needs a “whole economy” approach to make a success of Brexit because its supply chains overlap borders and its companies cross sectors, a report has said.

In Making a Success of Brexit, the CBI canvassed 18 different sectors to discover what most concerned them about leaving the EU. This is the largest consultation of its members since before the UK voted to leave the EU.

Its report calls on the government to consider the complexity of the modern economy and said the consequences of leaving any sector behind could have knock-on effects for others.

 “While each sector has issues specific to them, there are many crossovers and common principles that unite them, for example the need to avoid cliff edge changes that cause disruption to supply chains and trade,” said Carolyn Fairbairn, CBI director-general.

Many UK companies have business models based on integration with the EU, for example manufacturing businesses with integrated supply chains, criss-crossing the UK and EU borders, the report said.

“There are many prominent examples of these in aerospace, automotive and life sciences. This integration is even more significant for companies set up to treat the UK and Republic of Ireland as a seamless market,” it added.

Feedback to the CBI urged the government to keep non-tariff barriers to UK-EU goods trade as low as possible and minimise technical barriers to trade such as rules of origin declarations, quotas, labelling and packaging requirements.

“The many manufacturing and retail businesses that require just-in-time deliveries particularly prioritise minimal non-tariff barriers: delays in these carefully calibrated supply chains are extremely costly,” it said.

There were fears that leaving the EU without a preferential trading arrangement in place could considerably disrupt businesses as the EU would be obliged under WTO law to deny the UK preferential trade access.

“The ability for both the UK and EU infrastructure to cope with this scenario is questionable,” said the report.

“The knock-on effects through supply chains means this would have consequences even for businesses that do not trade.”

In manufacturing 57.5% of exports are to the EU and depend on complex integrated supply chains that extend across the EU, with 60% of parts supplied for cars built in the UK being imported, mainly from Europe.

Retail supply chains, especially food supply chains, rely upon access to non-UK labour. Denying this labour may undermine the ability of these supply chains to meet retailers’ requirements.

The CBI said there was also significant interest from the housing and real estate sector in the future of public procurement rules and about the future of EU financial services regulation.

Professional services firms were concerned that if the UK did not gain preferential treatment within the EU they could be excluded from European public procurement procedures.

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