Beyond Brexit – insight on the industry impact in 2021

09 March, 2021

“The UK Defence industry has maintained production in line with national security requirements and a network of bilateral agreements with countries will continue to operate after current EU agreements expire, which should support continuity of supply. Advance stockpiling and the flexibility of longer-term contracts suggests limited short term impact from possible border and transport delays.” Industrial impact on goods and the supply chain No company will be able to respond to the economic challenges in the world without a supply chain that is responsive and flexible. Darren Jukes, PwC UK’s industrial manufacturing and services leader, comments: “8 out of 10 cars made in the UK are exported, with over 50% heading to the EU. Industry will no doubt be relieved that a trade deal has been secured, however significant change is both here now and on the horizon – and tariffs are only one part of the story. Businesses have tried to prepare for the extra administration brought by customs declarations and paperwork, for example, but inevitably there will be teething problems as new requirements come into force. This could create delays and disruption to what have traditionally been well-oiled supply chains.

“Firms will be relieved that there is now some clarity on free trade arrangements. One interesting area are the rules of origin to qualify for free trade under the new agreement. For the automotive industry, the maximum value of parts or materials used in the manufacture of the car cannot exceed 45% of the ex-works value of the vehicle.

“Goods imported into the UK or EU in a finished state and not used in the manufacture of a vehicle will be subject to customs duty on import into both countries (unless another Free Trade Agreement is held with the country of supply). The UK car industry in the long term would benefit from a free trade agreement with the EU that allows for cumulation with other FTAs held by the UK, such as the new FTA with Japan, without which some UK cars may not meet the minimum value threshold rules to benefit from access to the FTA with the EU.

“There is a risk that costs could increase on cars and parts subject to the above, which will ultimately affect the final cost to the consumer. Ongoing negotiation with the EU will be essential to build upon this new trade deal. With the UK Government keen to be a global driving force for Net Zero, any moves that could discourage EV adoption would not be viewed favourably.”

The little discussed impact on manufacturing services and maintenance

Creating value beyond transactions has seen many UK businesses invest in developing enhanced service models that add post-sale value to customer relationships. Which is why it’s vital that organisations fully understand the new immigration rules that will impact business travel in the years to come. Cara Haffey, PwC UK’s manufacturing and automotive leader, comments: “Much of the focus in recent weeks has been on manufacturing supply chains and goods, however a key element that is rarely touched on is the services and maintenance trade that goes along with this. It is a significant part of the industry, with as many as four in five UK firms either developing or already delivering a servitised offering to their clients, such as after care agreements to keep fleets on the road or the ongoing monitoring of sensors in parts and equipment to ensure issues can be identified and rectified before they impact the customer’s business operations.

“Make UK’s International Trade service has also quoted that 35% of exports from the UK are involved in the provision of a service. If firms are to compete in an increasingly customer focused global stage, they need to ensure they are ready for changes to the rules, especially relating to people movement, as areas ranging from work permits and immigration licences to social security requirements may well have been overlooked. Any reduction in this vital after sales service could leave them at a disadvantage in the short term.”

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