European automobile manufacturers have called on the EU to take a softer stance regarding the UK’s future market access, and they warned that the bloc’s harsh position could have long-term effects on the automobile industry. In June, more than 50 European and British food and drink trade associations wrote to Brussels to request for more flexibility, underlying the fact that a tariff-free trade agreement needed to be coupled with the assurance that businesses will be able to benefit from it.

Why does the manufacturing sector worry?

For UK and EU importers and exporters, it is important to maintain a frictionless access to the single market. Manufacturing businesses are aware of the damaging effects of Brexit and the ensuing disruptions to their sector. Brexit-related uncertainty has made it very difficult for most sectors to prepare for a post-Brexit business environment and reduced the possibility of securing investment.

UK manufacturing is integrated into the EU single market, as almost half of all UK goods imports and exports are with the EU. Many UK manufacturers are dependent on frictionless trade with the EU so their supply chains are not interrupted. With the possibility of a no deal Brexit, manufacturing sectors are concerned about a potential lack of regulatory alignment with the EU as no business wants to lose the privilege of free trade.  According to independent research from the UK in a Changing Europe initiative, some sectors, such as automotive, could be severely affected if they have to pay tariffs to export cars to the EU in the absence of any agreement with the EU. As they warned, “In almost all cases, Brexit will create additional financial or other cost burdens for companies: tariffs, customs declarations, certification costs, audits to ensure rules of origin compliance, loss of collaboration opportunities in R&D, border delays, EU customers switching to other suppliers, visa costs for EU workers, and so on.”

Letter from the European Automobile Manufacturers’ Association (ACEA)

In a letter from the European Automobile Manufacturers’ Association (ACEA) last week, the association which represents  some of the biggest car manufacturers in the world, including BMW, Toyota and Fiat, warned Brussels that some aspects of the bloc's current stance are "not in the long-term interests of the EU automotive industry.” The ACEA urged the EU to "reconsider its position" on tariff-free trade. In its letter, sent last Thursday, 15th October, the ACEA requested from the EU to reduce the percentage of car components manufactured in Europe or Britain so that the businesses can benefit from any EU-UK trade deal. The car manufacturers are urging that the new rules be introduced slowly so that the automobile industry has the time to prepare and adjust for the new rules and environment. For EU manufacturers, an agreement that provides tariff-free, quota-free trade on all goods is crucial.

EU chief negotiator Michel Barnier has told businesses that “short-term adaptation costs” were necessary to protect “long-term economic interests.”

Nicolas Peter, BMW’s finance director, has said in a press conference last week: "The European Automobile Manufacturers Association (ACEA) has estimated that it could cost car manufacturers and suppliers from 10 to 11 billion euros, so we need tariff-free trade. And even then, it must be seamless. We have a just-in-time production system, so customs administrative processing must be efficient."

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Many businesses that export only to the EU do not have the necessary papers to continue trading after a no-deal Brexit, reports have shown.

According to the Liberal Democrats, statistics showed that no deal would be a “wholly irresponsible political choice,” but the government said that despite only a small number acquired the necessary documentation, these were nonetheless “the firms responsible for the bulk of exports to the EU.”

Once the UK crashes out of the EU, UK firms would require an Economic Operator Registration and Identification (EORI) number to be able to comply with economic operators and customs authorities.

 What is an EORI number?

EORI stands for “Economic Operators Registration and Identification number” and can be used by both business and individuals when trading. The EORI number acts as an identification number in all customs procedures making processes efficient, not only for customs authorities, but also for statistical and security purposes.

The EORI number is made up of two parts. One includes the country code of the issuing Member State and the other a code or number that is unique in the Member State.

According to the European commission, a legal entity such as a company or a natural person can request an EORI. More particularly, “persons established in the customs territory of the Union should request the assignment of the EORI number to the customs authorities of the EU country in which they are established.” Also, “persons not established in the customs territory of the Community should request the assignment of the EORI number to the customs authorities of the EU country responsible for the place where they first lodge a declaration or apply for a decision.”

Exports and imports 

If you are a firm that exports and imports outside the EU, you will have an EORI number, but as The Guardian notes, “registration has become a pressing issue for the 245,000 who trade internationally only within the EU. A no-deal Brexit would be particularly difficult for them because, instead of having current rules apply during a transition, they could find their trading opportunities shut down after 31 October without an EORI number.”

In another article by the Business Insider titled “Just 3 in 10 British firms that export to the EU are prepared for a no-deal Brexit,” it is said that only a 27% of British businesses have secured an EORI number and that there is a growing concern that British businesses will not be prepared for a no-deal exit on 31 October.

Lib Dem MP Chuka Umunna obtained information from the Treasury that shows that many firms are simply unprepared for a no-deal Brexit. The figures also show that if exporters apply for an EORI number at the current rate, all businesses won’t be registered until maybe the start of 2021. Umunna said that the statistics show “an overwhelming majority of UK exporters to the EU are unprepared for a ‘no deal’ Brexit and will not be in a position to deal with the mountain of red tape and bureaucracy it will burden them with on 31 October.”

He added: “Pursuing a ‘no deal’ Brexit is a wholly irresponsible political choice of the new administration for which there is no mandate and which will put businesses and jobs at risk. Any form of Brexit will harm the economy and put obstacles in front of UK firms which is why Liberal Democrats not only want a final say for the people on any deal but are also the only party that can get into Government which is committed to stopping Brexit altogether.”

British small businesses are not prepared for a no-deal Brexit in October, and, as the Business Insider pointed out, are even less prepared than they were back in March. On the other hand, businesses that already spent millions of pounds for a no-deal Brexit in the spring are now less motivated to spend more money in case there are further delays, while others just simply cannot afford it.

Chancellor Sajid Javid’s announcement last week for additional no-deal Brexit funding is not especially encouraging as most of it will be used towards government competencies, and not really towards helping businesses prepare. 

A spokesperson for the HMRC – the department responsible for issuing EORI numbers – said it was doing “everything we can to help businesses get ready for the UK leaving the EU. Businesses who import or export goods need to take action, the first step of which is obtaining an EORI number (if they don’t already have one.) It’s simple and free and can be done online.”

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UK exports to Europe

Brexit has caused a lot of uncertainty for UK importers and exporters. The difficulties facing many British companies trading overseas have become an inseparable part of Brexit debates. For many, the issue lies with the UK’s decision to leave the EU.

In an article on the Guardian, Gareth Stace, director general of the trade association UK Steel, argues that leaving the EU has the potential to cause a great deal of damage to exports and weaken the sector more.

British Steel

In an attempt to present his views and the general steel industry’s position when it comes to its current issues and Brexit uncertainty, Stace admitted:

“There can be no doubt that the ongoing Brexit uncertainty has contributed significantly to British Steel’s problems. Unable to decipher what the UK/EU trading relationship will be in just five months’ time, planning has become fiendishly complicated for both UK exporters and their EU customers.” He also added that things have become more complicated with the EU’s recent measures seeking to prevent steel imports surging, a move that reflects a more general protectionist turn seen elsewhere.

As Stace wrote, “Post-Brexit, UK steel exports to Europe will be restricted by these measures, with a disorderly no-deal Brexit affecting them particularly badly.”

No deal Brexit is bad, but what about an orderly Brexit?

Stace elaborated on the question of whether a well-organised Brexit would improve things for steel exporters. For example, he questioned those who claim that with the UK being outside the EU, the government would support extensively the steel industry. As he argued, “the UK steel sector has no interest in operating under the support of state subsidies (we are vociferous critics of this practice in places such as China).”

He emphasised that the UK’s ability to provide state support was restricted nonetheless, due to its WTO membership, “which bans certain subsidies outright, and allows others to be counteracted by other WTO members with the imposition of ‘anti-subsidy duties’ – effectively closing off important export markets.” He also pointed out that the EU has already aligned itself in terms of state aid rules, so any agreement between the UK and EU would not be beneficially better. Similarly, other countries such as the US would also want to align themselves with the current provisions when they strike trade agreements with the UK, so the UK would not, in essence, enjoy any special treatment.

“Brexit would not provide greater trading opportunities”

The Brexiters’ mantra has been, since the beginning, based on the premise that the UK’s withdrawal from the EU would come with the promise of striking limitless deals. Boris Johnson used this slogan in many occasions, but the “freedom to do our own trade deals,” as many Leavers have proclaimed, is not an easy fit. This is also the case for the steel industry. Stace clarified that Brexit would not come with the opportunity to strike many deals. As he said: “WTO tariffs on steel in developed countries are already zero, and the EU’s expanding list of FTAs is providing tariff-free access to many others. There is little advantage any new UK FTAs could offer.” Additionally, as UK-produced steel “qualifies as EU steel under complicated rules of origin within the EU’s FTAs,” this means that any European country can use it, whereas, after Brexit, UK steel “would be classified as UK not EU, reducing the attractiveness of it to EU manufacturers.”

In essence, Stace explained, “Brexit will not improve the situation for the steel sector but it has the potential to cause a great deal of damage.” For him, the biggest priority is to secure a withdrawal agreement as soon as possible. And this is what most businesses are also demanding.