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Brexit deal is 'day to day' battle for manufacturers

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read
A line of cars on a car assembly line at the Vauxhall car factory during preparedness tests and redesign ahead of re-opening following the COVID-19 outbreak. Located in Ellesmere Port, Wirral, the factory opened in 1962 and currently employs around 1100 workers. It ceased production on 17 March 2020 and will only resume work upon the advice of the UK Government, which will involve stringent physical distancing measures being in place across the site. (Photo by Colin McPherson/Corbis via Getty Images)
A line of cars on a car assembly line at the Vauxhall car factory during preparedness tests and redesign ahead of re-opening following the COVID-19 outbreak. Photo: Colin McPherson/Corbis via Getty Images

MPs have been told of "systematic" issues facing UK manufacturers post-Brexit, many of whom are struggling under a mountain of new paperwork.

Industry bosses told MPs on the Business, Energy and Industrial Strategy (BEIS) Committee that Brexit had pushed up shipping costs, increased paperwork, and created confusion over border regulations and enforcement.

“All industry is paddling furiously below the water to keep things going," said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT). “Businesses are managing but just managing at the moment."

READ MORE: UK economy stabilises even as Brexit hits manufacturers

Hawes said the Brexit deal had created "significant" issues for his members that were "difficult" to adapt to.

“The systemic issue is: This does add cost," he said. "It is a lot more complicated to move stuff across borders than it used to be."

The issue has been compounded by COVID-19, which has pushed up shipping costs fourfold. Hawes said some of SMMT's members were considering transporting cars by air — a route that is usually too costly to justify.

Paul Everitt, chief executive of ADS, the trade association for the aerospace and defence industry, said it was a “day-to-day battle just to make those new arrangements work.”

“It’s a stressed environment," Everitt said.

Watch: UK agrees to give EU more time to approve trade deal

READ MORE: Businesses stop serving EU due to 'nightmare' Brexit rules

ADS's members are struggling with new border arrangements, paperwork, the availability and cost of transport, new regulations, uncertainty surrounding Northern Ireland, and the availability of chemicals, he said.

"The majority are systemic issues which are bound to the terms of the deal," Everitt told MPs.

Industry bosses said it was too early to say whether the Brexit deal struck between the UK and EU would bring any benefits.

Ian Howells, senior vice president of Honda Motor Europe, said there were “some opportunities” presented by the ability for Britain to set its own rules but there were also “risks” if the UK diverged too far from the EU. Divergence could add cost and complexity, he said.

READ MORE: £34bn Brexit VAT bill pushes companies to the brink

Executives all said there was widespread relief across business that the UK had managed to secure a trade deal with the EU, even if it created more complexity.

“This is the new normal - we accept that," said Hawes.

Hawes said issues could be mitigated by sourcing more materials from within the UK and building up domestic capacity for things like electric batteries.

A private sector survey earlier this month found widespread disruption across the UK manufacturing sector. Duncan Brock, group director at the Chartered Institute of of Procurement & Supply, said manufacturers were experiencing "some of the worst supply chain disruptions since records began in the early 1990s" and blamed Brexit for the issues.

Watch: What could scrapping EU labour rights mean for UK workers?