Mark’s Brexit Week for Transport

Theresa May, in her Mansion House Speech on Friday and in her interview with Andrew Marr on Sunday, has provided much needed post-Brexit clarity for the UK transport sector. In particular she made a commitment to ensuring the continuity of air, maritime and rail services, and protecting the rights of road hauliers to access the EU market and vice versa. In some areas, such as aviation, she provided even more clarity with a stated desire to explore continued membership of the European Aviation Safety Agency. The principle underpinning this commitment is clear for all modes:  the Government wishes to maintain regulatory alignment.  And, just as significantly, she also expressed a desire to maintain compliance with EU state aid and competition policy.  So whilst the UK Parliament will take back control of regulation, it will voluntarily decide to align transport regulation, state aid policy and competition law with EU law. The Prime Minister goes on to say ‘If the Parliament of the day decided not to achieve the same outcomes as EU law, it would be in the knowledge that there may be consequences for our market access.’ In other words, the UK is likely to maintain regulatory alignment with EU law for the transport sector for many years to come.

This has two major consequences for us in terms of our handling of Brexit:

Firstly, we need to move fast and all to sing from the Government’s hymn sheet. In Brussels and EU national capitals, including London, we need to lobby for the best possible transport deal, based on the UK maintaining regulatory alignment, and accepting EU state aid and competition law. Up until now there has not been that degree of clarity from Government, or unity from the industry, for such a deal to be realistic. Now there is.

Second, we need to rise to the influence challenge. In just over a year, control and influence over our regulatory environment will no longer be through the direct representation in the EU institutions. So we need to develop more subtle, indirect and business-led mechanisms to achieve continued influence.

For the first time since the referendum we can now see the light at the end of transport’s Brexit tunnel.  

1. Airbus warns it may need to stockpile parts against Brexit
The BBC reports that Airbus, one of the UK’s biggest manufacturing employers, has warned it may have to stockpile parts to operate smoothly once the UK leaves the EU. Katherine Bennett, senior vice-president for Airbus UK, told the BBC that the firm operated a “just in time” supply chain, which meant that even a three-hour delay at Dover, for example, would be “a critical issue. Airbus builds its planes in four “home” countries across Europe. She further added that “We spend £5bn a year on the UK supply chain… it is really important the parts don’t get held up in warehouses”. In the UK, Airbus builds the wings for its planes at Filton, near Bristol, and has other operations at Broughton in North Wales. This story fits into a wider pattern of companies being increasingly concerned over disruptions to the supply chains stemming from Brexit consequences. What is your business doing to prepare itself for Brexit? Contact us if you would like to know more about the exposure you may face from Brexit supply chain disruptions.

2. ICYMI- Commission publishes slides on transport in context of the future UK-EU relationship
Published last Wednesday, the European Commission presented slides to the Council Working Party (Article 50) regarding “Internal EU27 preparatory discussions on the framework for the future relationship: Transport”. In these slides, it is shown that the UK government red lines and the EU27 guiding principles mean that the EU-UK road, rail and maritime transport relationship will need to be based on a new legal framework. The slides indicate the UK leaving agencies such as the European Union Agency for Railways (ERA), the European Maritime Safety Agency (EMSA) and demonstrates what the UK’s international ‘fallback’ agreements are for the road, rail and maritime sectors. Importantly, due to the UK being outside of the Single Market, international transport and transit rights will come through a bilateral quota system. Would you like a full report on the EU’s transport discussions in the framework of the future relationship? Contact us to find out more.

3. A Customs Union- The red herring of a ‘Soft’ Brexit?
Last week began with Jeremy Corbyn laying out Labour’s new Brexit stance, in favour of remaining in a Customs Union with the EU. This issue will rise up again this week with an amendment to the Brexit Withdrawal Bill which could, according to whom you ask, legally-bind the UK to remain in a Customs Union. There is a lot of attractiveness to the idea of the Customs Union as the Guardian writes but there are many significant disadvantages to simply remaining in a Customs Union with the EU. For one, the UK would not be able to independently negotiate trade deals, and Turkey’s example of being the only non-EU country in a customs arrangement with the EU does not provide a positive outlook. Additionally, the idea that a Customs Union would maintain a frictionless border between Ireland and Northern Ireland is an illusion, as there would still need to be checks on products crossing between the UK and the EU. The Guardian article concludes that the real Brexit choice is not Soft vs. Hard but rather between No Brexit vs. a Hard Brexit.

4. Theresa May announces Transport regulatory alignment post-Brexit and continued EASA membership
In her speech on Friday, Theresa May announced that “On transport, we will want to ensure the continuity of air, maritime and rail services; and we will want to protect the rights of road hauliers to access the EU market and vice versa”. We don’t know yet how such a relationship would work but this has been stated before by the likes of Chris Grayling, and we believe that transport would represent one of the Basket One sectors which would seek continued alignment. If you would like to help make the case for continued transport alignment, then please join us.

5. Cross-party report: U.K. Auto Sector’s Only Brexit Option Is Damage Control
An impact assessment from the Business, Energy and Industrial Strategy Committee has urged  Prime Minister Theresa May and her cabinet to take a “pragmatic” approach to negotiations with Brussels. According to the report compiled by 11 cross-party lawmakers, “there are no advantages to be gained from Brexit for the automotive industry for the foreseeable future,” further adding that “the negotiations are an exercise in damage limitation. The government should acknowledge this and be pragmatic”. The report highlights that the U.K. employs nearly 1 million people in the sector either directly or through supply chains and the industry makes up 13 percent of all goods exported from Britain, the second highest from any one sector. Chief among their fears: the introduction of a 10 percent tariff on U.K. exports and imports in the event of a no-deal Brexit, which might shift production away from Britain. Profit margins are small in this sector, between 2 and 4 percent, and tariffs could make some U.K. manufacturing unsustainable. The report further adds that it could find no upside to breaking with EU regulations and recommended the government tries to preserve the existing framework.

6. UKTiE has also put together the latest timetable for Brexit. We will keep this up to date as the process develops: 

  • 29 March 2017 – A50 triggered.
  • 5 April 2017 – European Parliament adopted Brexit guidelines.
  • 22 May 2017 – Brexit negotiating directives approved by Council.
  • 19 June 2017 –  Negotiations formally began.
  • TBC 2018 – UKTiE  & Norton Rose Fulbright Summit: Customs arrangements after Brexit.
  • March 2018– Guidelines due to be released for the negotiations on the future trading relationship.
  • 30 September 2018 – Date by which EU’s chief Brexit negotiator, Michel Barnier, wants to conclude the terms of Britain’s exit from the Union.
  • 30 March 2019 – Britain formally exits the EU, following ratification of Brexit by all other member states and the European Parliament.
  • May 2019 – European Parliament election.
Mark Watts
UK transport in Europe (UKTiE)
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