European manufacturers warn of no-deal 'disaster'

Negotiations over a post-Brexit trade deal between the EU and UK resumed in London on Thursday amid warnings from European manufacturers that failure to reach an agreement would prove "disastrous".

David Sapsted

22 October 2020

A week after Prime Minister Boris Johnson threatened to walk away from talks, EU representatives flew in from Brussels hours after chief negotiator Michel Barnier told the European Parliament that an agreement was "within our grasp" if both sides compromised.Speaking to Sky News, Crime and Policing Minister Kit Malthouse said he had his fingers crossed that the new urgency injected into the talks would now pay dividends. "Negotiations often involve a bit of temper, and tensions, and slamming doors and walking out," he said. "It's in the nature of a negotiation that these things become tense, particularly towards the end when you're facing a deadline."The extent of state subsidies, how to arbitrate future regulatory differences, and fishing rights remain key sticking points that could still prevent any agreement being reached.Growing industry fears that the two sides will fail to reach a deal by the time the Brexit transition period ends on December 31 were illustrated by an open letter to the UK government and the European Commission from the British manufacturers' organisation, Make UK, and Ceemet, the Brussels-based association representing the EU engineering and tech sectors. Backed by dozens of business leaders, the letter says that if manufacturing's gradual recovery from the Covid-19 pandemic is to continue, it is "essential" that the seamless operation of supply chains remains intact, along with "the modern marvel of just-in-time logistics".The letter continues: "A no-deal scenario with our most critical trading partner, the EU, would be disastrous for manufacturing and for the millions more employed in supporting industries both here in the UK and across the EU.“The impacts would go far beyond disruptions in trade at the border. Families and communities would be left hanging in the balance, affecting real people who need the well-paid jobs that manufacturing provides alongside its contribution of almost half of Britain’s global exports.“Manufacturing and engineering companies employ 2.7 million in every constituency up and down the UK and many millions more across the whole of Europe. Their products power our loves - the cars we drive, the technology behind our schools and hospitals, even the meals we consume."The letter's authors - Stephen Phipson, chief executive of Make UK, and Oliver Zander, chairman of Ceemet - point out that British and European manufacturing companies are leading exporters of the innovation, product and technical skills that are critical to efforts to lead the post-pandemic economic recovery."The Covid crisis has had an incredibly damaging impact across the UK and Europe," the letter adds. "As a consequence it has been impossible to fully prepare for the changes that are coming in January. Should we face the challenge of an acrimonious exit without a deal, businesses in the UK and Europe are united in the view that they are not and cannot be ready for the disruption that we face."The organisations are calling on both sides to keep negotiating to "avoid the disaster of an exit without a deal" and to work "to ensure that we achieve the best deal possible avoiding tariffs, simplifying rules of origin and minimising red tape and bureaucracy at the border".More pressure on UK negotiators came later on Thursday when the Confederation of British Industry's (CBI) latest Industrial Trends Survey showed that output volumes in the three months to October fell again, but at their slowest pace since March.The survey of 310 manufacturing firms found that total new orders were broadly flat in the three months to October following their sharp drop in July and a total of five successive quarters of decline. Domestic orders picked up slightly, while export orders fell at a much slower pace than the previous quarter.Rain Newton-Smith, CBI chief economist, said: “Conditions remain tough in the manufacturing sector, with output and orders still down on the quarter, albeit to a lesser degree. The government must stay on the front foot when it comes to providing support for the sector and wider economy.“It is more crucial than ever for the government to listen to the experiences and concerns of businesses and ensure support matches the tightness of local lockdowns. Additionally, signing a trade deal with the EU would help create some clarity that firms so badly need during this fraught period.”