Welcome back. Do you work in an industry that has been affected by the UK’s departure from the EU single market and customs union? If so, how is the change hurting — or even benefiting — you and your business? Please keep your feedback coming to
Brexit is often explained by its proponents as first and foremost an expression of sovereignty — taking back the right of the UK to make its own laws and not to be controlled by “faceless bureaucrats” in Brussels.
As a political narrative, this has proved successful for Boris Johnson, but it has led the UK into some very counterproductive places, as an approach that prioritises sovereignty above all else excludes many layers of co-operation with the EU, even when they make practical sense.
One of these which is causing particular pain to industry at the moment, but does not receive much publicity, is the transition from the EU’s “CE” mark that certifies the safety of all manner of industrial products for the EU market, to the UK’s new homegrown equivalent, the “UKCA” standard.
At the moment, as Sam Lowe, the trade expert at the Centre for European Reform, explains, this is essentially a duplicative process because UK standards follow EU standards in the “vast majority of cases”.
(This is because the UK’s BSI standards organisation has remained a member of the European Standards Organisations, which co-ordinates standards in the EU, and co-operates with the European Commission via an agreement, but is not itself an EU body.)
You might think, therefore, that this expression of UK sovereignty (a UK version of a CE mark, for its own sake) is an example of what Lowe calls “performative divergence”, ie of little actual consequence but important to show that Brexit has delivered concrete change.
Alas not. For a number of UK industries that use safety critical products (lifts, cars, medical devices for example) the transition to UKCA marks is a massive and unnecessary headache, for a number of reasons.
Firstly, UKCA marks must be handed out by UK-based testing or “Approved” bodies and there is not enough capacity in many sectors to handle the applications, even if they are essentially “cut and paste” of CE approvals.
Nick Mellor, the managing director of the Lift and Escalator Industry Association describes the shortage of UK approved bodies in his sector as “critical”. There is currently only one organisation in the UK able to undertake certification for lift safety components, but “thousands” of parts that need certifying.
The system also throws up unresolved anomalies. So for example, if I service a 10-year-old German lift in Birmingham or Brighton, does the replacement component (that was always CE-marked) now need to be UKCA-marked after January 1? If that is the case, it may not even be possible to source the component. Industry is still not clear on this.
The Construction Products Association has issued similar warnings, saying the UKCA process could add to existing shortage problems, highlighting capacity issues around high-spec glass and building adhesives — and, often, it only takes one missing product to hold up an entire project.
It is all nerdy stuff, but according to the engineering services alliance Actuate UK, in another product area — “heat emitters” — where there are eight EU “notified bodies”, the UK equivalent would need to complete “64 years’ worth of retesting” in less than seven months to certify all EU products for the UK market.
Which brings us to the second issue. This does not just impact UK businesses. EU businesses placing goods on the UK market need a UKCA mark, meaning UK businesses need to convince their EU suppliers to do the paperwork. For some the size of the UK market will be worth it; for others, not. That could impact UK supply chains.
Thirdly, there is a legal issue. After January 1 UK companies placing EU products on the GB market (that will now bear a UKCA mark) must take legal responsibility for those products — and vice versa for EU companies putting GB products on the EU market. So companies on both sides of the Channel are now also having to weigh up legal issues, and draw up agreements with EU suppliers over what happens if a product from the other jurisdiction is subject to court action.
And all of this before the UK does actually diverge. When that happens, industry will face the cost of two separate testing regimes for companies that sell in both EU and UK jurisdictions, which could lead to some tough decisions on the viability of some products for the UK market.
All of which explains why there is a rising chorus of industry trade groups calling for the government to extend the January 1 2022 deadline by which all CE-marked goods on the GB market must carry a UKCA mark in order to be legal.
The government has done this already for a small group of products, such as marine equipment and medical devices, giving those companies until the end of June 2023 to comply, which sets a precedent that other industries now want followed.
Russell Beattie, the chief executive of the Federation of Environmental Trade Associations, is at pains to say that industry does not want to come across as “remoaning”, but as everyone comes out of the Covid-19 crisis, he urges the government to be pragmatic. “We’re not remoaners. We need some sensible discussion about the consequences,” he added.
As Tim Figures, a former senior business secretary adviser during the Theresa May era who now advises the Boston Consulting Group, observes, diverging from the EU regulatory framework brings “little or no benefit” in safety-critical industries that export to the EU like automotive, aerospace and chemicals.
Looking to the future, he adds, there may be some sectors — artificial intelligence, life sciences and possibly some financial services — that could benefit from divergence.
But that does not help those grappling with apparently senseless bureaucracy now.
The wider politics of all this is baffling. It is hard to imagine anyone in the “red wall” or pro-Brexit Tory shires ever itching for a UKCA mark when they voted for Brexit, or care a jot about it now. There is no obvious benefit to this process. It is not making UK products safer (they are the same EU standards as before) but it is very likely to make them more costly and less competitive overall.
Which is why Lowe bets the government will have to move on this one, at least in the near term. “It wouldn’t surprise me if the UK decides to continue recognising CE marking well beyond the end of this year,” he says.
But with logistical lead times on many products measured in months, not weeks, the time for the government to take that decision is approaching fast.
With Boris Johnson signalling his determination this week for the UK economy to reopen fully from August, there are growing signs of a labour market squeeze in industries such as haulage, construction and hospitality. Job vacancies are getting back to pre-pandemic levels.
A mixture of issues are contributing to this, including the rules around the furlough scheme which make some people reluctant to go back to work, long-term skills deficits as well as the ending of EU “free movement” which until January took up the slack.
The government is under pressure to relax some of the immigration rules it brought in after Brexit, adding to the Shortage Occupation List, with the trucking industry leading the way in these calls, but other industries are also pushing.
This is tricky territory for the government which vowed “to shift the focus of our economy away from a reliance on cheap labour from Europe”, and focus on “investment in technology and automation”. They warned that “employers will need to adjust”.
While groups like the Road Haulage Association want short-term visas for drivers, that would set a precedent for other industries, and also upset unions like Unite, who believe higher wages and better working conditions would address the problem. As this week’s fudge over truck driver shortages showed, the danger is that halfhearted solutions do not fix the supply issues and leave everyone unhappy.
Ultimately this is a balance between keeping the trains (or trucks) running on time in the short term, and creating enough pressure to force the desired socio-economic adjustment. As we emerge from Covid-19, the next few months will be critical in seeing where the political needle actually sits on this one.
And, finally, three unmissable Brexit stories