Industry supply chain could be broken by Brexit fallout
Vital parts for British goods such as cars and fridges could fall into a legal limbo as Brexit red tape holds up supply chains, The
Independent has learnt. Manufacturing is at risk from serious disruption because the government has failed to devise a suitable replacement for the EU’s safety standards system. This means components needed for use in the UK will not have a suitable “kitemark” to guarantee a product is safe which could force manufacturers and their suppliers to down tools or divert their trade elsewhere, leading figures have warned. Without confirmation that these safety and environmental standards are met, products and parts cannot be sold on the UK market.
It is the latest setback for British industry as it reels from pandemic-triggered supply chain shocks and labour shortages. During Brexit negotiations, the UK failed to secure an agreement with the EU to recognise one another’s safety standards, known as conformity assessments. Currently, there are markings on products throughout homes and offices in Britain and Europe. They can be spotted by the stamp “CE” which means they meet European health, safety and environmental standards. These kitemarks must be policed by a government-approved testing body, and from January 1 2022 most products must be separately approved for a UK regime.
But the failure to secure recognition for the UK’s conformity assessment (UKCA) bodies has cut a slice off the UK’s advantage in international trade. The government’s own guidance said, “it was not the desired outcome” in talks. Industry bodies, factories and conformity assessors told The Independent that there isn’t enough capacity, or no capacity at all for testing certain goods ahead of the January 1 2022 UKCA compliance deadline. It now risks a major falling out between business and government if, as feared, it derails British supply chains. It could also hold up business’ recovery efforts in the wake of the pandemic.
Projects such as refurbishing commercial premises or building homes could be stopped in their tracks, because contractors are required to install products, such as fridges and fridge components which meet UK regulations. These can only be found to comply with that contractual obligation if confirmed by the new UKCA regime, and some products are currently caught
in backlogs. Three people familiar with government engagement on the issue said that it had come to a head in a meeting last month of the Business Brexit Taskforce, which includes the B5; the British Chambers of Commerce (BCC), Confederation of British Industry (CBI), Federation of Small Businesses (FSB), Institute of Directors (IOD) and Make UK.
David Frost, former chief Brexit negotiator and the government lead for EU-UK relations, was told ahead of the meeting and during the session, that conformity checks are an urgent issue, according to the people and correspondence reviewed by The Independent. So far, the government has been reluctant to extend the deadline for insisting on UK-only checks, arguing that it’s a matter of UK sovereignty and that businesses must not use delaying tactics to avoid changes, sources said.
“Conformity assessments are rapidly becoming a major blockage for companies who are now in a queue to get their products approved with the clock ticking down to the end of the year,’ said Ben Fletcher, chief operating officer at industry body Make UK. “Many more are not even aware that this change is happening so soon.” He added: “There is enormous bureaucracy involved in approving test centres and government needs to urgently fast track their approval so these delays in getting products approved for UK companies can be removed.” Mr Fletcher said that there was also the risk of a “knock-on” effect from EU companies coming up against these delays, and choosing to give up on supply the UK market. This is because companies will have to get their products tested both for the EU and for the UK markets, duplicating red tape and costs. The UK’s market is far smaller than the EU’s, which will make that additional cost unappealing for many suppliers.
It comes after figures from the number of cars rolling off UK production lines slumped to the lowest level since 1953 in June, according to the Society of Motor Manufacturers and Traders (SMMT). This excludes activity in June 2020, which was still impeded by the first pandemic-triggered lockdown. The global shortage of semi-conductors and a shortage of labour were both major factors, according to the SMMT. This was underscored by
fresh survey data from IHS Markit on Monday which showed stretched supply chains were acting as handbrake on manufacturers’ output.
These shortages in supplies mean that purchasing managers at factories are having to fight off competition in order to secure crucial parts. The added friction of additional Brexit red tape makes those conversations harder, and ultimately make it more expensive to buy-in supplies, supply chain managers at major UK factories said. Brexit has moved UK from a global leader on conformity assessments to a relatively isolated regional player. The UK’s testing laboratories took around an 80 per cent of this business activity across the entire EU market before it quit the bloc.
Now, it is struggling to set up its own independent assessment regime. UK testing bodies are no longer recognised by the EU and vice versa from next year. Without a UK-recognised conformity assessment provider, manufacturers do not know how they will meet standards from January 1, a problem they have raised with government over several months. Two people familiar with the operations at carmakers who have a major presence in the UK told The Independent that they need 6-10 months’ notice to switch conformity checks in order to make sure the vehicles coming off their assembly lines meet the correct standards.
The lack of clarity from the UK government means that for critical inputs such as for airbags, which must meet UKCA standards on pyrotechnics, legal compliance cannot be secured in time. At the time of writing, there is no means to meet UKCA requirements for airbags from January 2022. The impact on industry is much broader than airbags, however, with critical components for a very broad range of goods requiring new testing for the UKCA regime from January. It’s a problem for importers and exporters, according to business lobbying body, the BCC.
“We have serious concerns about the effect on business of the looming deadline for CE marked goods coming onto the market in Great Britain,” said William Bain, head of trade policy for the
BCC. “Without a long-term solution, or at the very least an extension to the easement beyond January 2022, manufacturing supply chains could face serious disruption if suppliers in the EU cannot have components assessed under the British standards regime.” He added that the body was “hopeful” the government could supply a solution to the issue, but “with around 150 days to go the clock is ticking loudly”.
Mike Hawes, chief executive of the SMMT, said his organisation was “working closely” with government officials on implementing new UK certification processes. He added that the SMMT supports “government exploring all options, including an extension to the grace period to give certainty and reassurance to businesses as soon as possible.”
Lord Frost’s team, aided by other government officials, is due to present a solution to industry in the autumn but some bodies fear even this is not timely enough. The uncertainty has damaged relations with suppliers, and the failure to secure mutual recognition of UK-EU conformity assessments is a major blow for the UK’s competitiveness, they said. A business department spokesperson said: “Businesses have a responsibility to ensure their products meet the requirements of regulations. We continue to work with industry on this issue and to ensure they understand their obligations.”
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