Preparing for Brexit transition with or without a deal

The Chemical Industries Association (CIA) is urging chemicals sector companies to put contingency plans in place to make sure they’ll be able to continue operating even if the UK and the European Union (EU) are unable to reach a post-Brexit free trade agreement.

The CIA’s exhaustive new ‘No-Deal Brexit Briefing’ points out that the post-Brexit transition period expires on 31 December 2020. After that, the CIA says: ‘While delays at the border might be beyond your direct control, ensuring that your customers and partners are registered for import/export, that you have completed the necessary export documentation and that your substances are registered both in the UK and in the EU are within your control.’

The briefing, supported by the Department for Business, Energy and Industrial Strategy (BEIS) Readiness Fund, explores what chemicals companies should be doing now to avoid problems on 1 January 2021. It covers four areas.

  • Trade – if the UK leaves the EU with no free trade agreement, all exports to the bloc will be liable for tariffs. There will also be new requirements for export and import documentation, requiring customs declarations each time goods cross the UK/EU border. This has the potential to substantially increase administration.
  • Energy – even with no deal, the UK and the EU are expected to have continued access to each other’s markets and the EU has zero energy tariffs to the rest of the world. BEIS and the Office of Gas and Electricity Markets (Ofgem) are working to address non-tariff barriers.
  • Climate change – the UK will be excluded from the EU Emissions Trading Scheme (ETS), meaning there will be requirement to surrender EU ETS allowances for emissions from 1 January 2019 for UK operators of stationary installations. The UK Government won’t have guaranteed access to the EU ETS Registry or the Kyoto Protocol National Registry, but the Government intends to maintain EU ETS Phase 3 monitoring, reporting and verification arrangements. And there’s a possibility that an interim Carbon Emissions Tax of £16/tCO2 will be introduced.
  • Environment – the UK has committed to upholding environmental standards even if there is no deal. Existing EU environmental law would be transposed through the EU Withdrawal Act and secondary legislation. It’s unlikely to make allowances to a Union Registry trading account in another EU member state before the UK leaves the EU.

Manufacturing sector news

The latest data from the Purchasing Managers Index for the manufacturing industry, released on 2 November, shows the index slipping from 54.1 to 53.7. This suggests a slower, but still positive, rate of growth in the sector.

The data is in line with the recent CBI Industrial Trends Survey for the third quarter of 2020, which suggested manufacturing activity remains on a gradual path to a modest recovery. In the CBI survey, manufacturers reported that their output volumes were, on average, down 15% on more normal times because of the coronavirus crisis. They expect output to grow, although at a moderate rate, with new orders and recruitment remaining broadly flat.

More challenges lie ahead. Our recent Trade Barometer report suggested manufacturers see bureaucracy as their biggest challenge when trading in international markets and this anxiety persists as we prepare for the end of the post-Brexit transition period on 31 December. Manufacturers (like all businesses) need to take action now to be ready. Useful guidance is available from the Government and MakeUK. We can also provide support, including:

  • detailed guidance on all the key areas of regulatory compliance businesses should consider as they prepare for transition
  • detailed customs training in all key aspects of international trade 
  • guidance on what government support could be available for your business
  • a company who can handle all of your customs documentation requirements, including completion of documents and submission onto the Customs Declaration Service (CDS) or Customs Handling of Import and Export Freight Service (CHIEF) platform.

Embracing digital

A new report from MakeUK and Sage reveals UK manufacturers took rapid and significant steps towards digitalisation when the pandemic struck, with nearly half adopting digital working practices within two weeks of lockdown. Some 94% of companies said staff were able to successfully work from home after just a fortnight of planning and installation. That’s impressive in industries often associated with manual tasks and a high proportion of production-based work.

The report found 9 in 10 manufacturers had benefited from adopting new digital technologies during the crisis, with 8 in 10 expecting to continue adopting new working practices. A quarter said these new technologies had increased productivity, with 12% pointing to increased production.

This acceleration will need to continue as manufacturing recovers. We can support investment in these key technologies, and we are working with our partner BDO (the accountancy and business advisory firm) to launch a new research and development tax credits funding product. This will help businesses to take advantage of the tax incentives available to firms that pursue innovation.

To discuss how we can help your business please contact: ccbsectorinsights@santander.co.uk

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