"Don’t import from Britain if you want to keep benefiting from EU free trade agreements” – this was the gist of an advice notice published this week by the EU Commission. It asks EU-27 producers to take Brexit into account and think twice before using parts made in the UK. This is a very clear move from the EU and quite possibly their strongest message yet to set out some of the consequences ahead. While the UK government squabbles internally because the cabinet cannot agree, the EU is doing its best to mitigate the impact our withdrawal will have on the EU-27. What does the EU Commission’s advice to its stakeholders mean for us?
On the 29th of March 2019, in less than a year, our existing trade arrangements with the EU will cease to apply and the UK will no longer be considered by the EU as a ‘preferential origin of goods’ as we drop out of the EU customs union. Without this designation UK exports into the EU will cease to receive low trade tariffs. Where will this leave the UK? Unfortunately, yet most probably, at the bottom of the list of EU-27 preferred countries for imports.
The UK is currently the second largest manufacturer in Europe by output and the 8th in the world. We aspire to increase our trade with China – the largest manufacturer in the world – but we’ve been clearly told by the Chinese that there will be no trade talks without a Brexit deal, as the uncertainty caused by no deal will have ‘spillover effects’ for the global economy. Liam Fox, the International Trade Secretary who boasted that a trade deal with the EU after Brexit would be the ‘easiest in history’, is meanwhile trying to see if a deal can be struck with Trump, a deal that might see the UK forced to import chlorinated chicken. Fox has had no luck yet, quite the opposite, the UK is now on the receiving end of the US president’s punitive steel and aluminium tariffs.
On the other hand, the EU is already ahead of the game in agreeing a new trade partnership with Japan, as negotiations were finalised earlier this year, a deal the UK will now as a result of Brexit be excluded from. It is clear, and has always been for us as MEPs, that our future trading prospects are limited outside of the EU, but we can do some damage control if we retain our membership of the Single Market and a Customs Union.
The North East is expected to experience a particularly negative Brexit impact which will result in lower future levels of economic activity. We have a disproportionately large trading relationship with the EU (61.7% of our regional exports head to EU27, the highest in Britain), especially in the automotive and pharmaceutical sectors – the two single most important sectors in England at the forefront of driving innovation.
The government’s own analysis shows the biggest negative impact will be on the North East economy in case of a no deal with a 16% decline in our future GDP. The prospects are bleak for our region regardless of what this government manages to negotiate with North Tyneside, Newcastle and Gateshead especially badly hit. Even in the best case scenario the North East region will be the worst hit off all the English regions. It’s easy to miss the meaning of the message behind the numbers, but to look at it from a different perspective, during the 2008 recession – which led to the current severe austerity cuts – the UK economy suffered greatly, with the overall hit to GDP calculated at minus 6.2%. So we know a ‘no deal’ Brexit would be more than twice as harmful and severely damaging to our region’s prosperity. Contrary to the 2008 recession, this time we are doing this to ourselves.
This outlook is supported by a new report published by the North East Local Enterprise Partnership (LEP) which suggests the Brexit impact will be felt over a longer period of time. However, some immediate consequences are now evident and North East businesses have already taken decisions on a risk management basis in the absence of clarity from the UK government. We meet with local businesses on a regular basis and the consensus is resounding: they need more clarity and they want to stay in the Single Market and a customs union. These views are backed by a North East of England Chamber of Commerce survey showing that the overwhelming view of businesses, 9 out of 10, want to retain our membership of the Single Market and a customs union.
As representatives for the North East in the European Parliament, we want the absolute best for our region and our constituents. We are frustrated by the Government’s lack of direction and inability to decide what it wants from the negotiations. The future is looking bleak. We are a region that prides itself on having the biggest car manufacturing cluster in the UK. Our yearly exports to the EU amount to £12 billion. Any reduction of the ability of our manufacturers – including Nissan in Sunderland, Hitachi in County Durham, and the chemicals and process industries in Teesside – to export to the EU will have a serious impact on our economy that could put over 140,000 jobs that are dependent on EU trade in the North East at risk.
It is time the Government stopped bickering amongst themselves, put the country first and decide on a Brexit position based on a reality that reflects the needs of communities and businesses. We will continue to push for the people of our region to come first and to stop them falling through the cracks of a bad Brexit. It is about time the Government did the same. They could do that by supporting a future customs union and single market deal with the EU-27 next week in the Commons.