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Is the UK Heading Towards a Return of Brexit Uncertainty?

Brexit is back. Not that it ever went away. Like a bad guy in a horror film, every time it seems to have been finally dealt with, it jerks back to life again. Questions that we thought had been answered now appear to be up for grabs again creating uncertainty for UK manufacturers.

High-quality plastic moulding businesses like ENL Group work best when there is stability in the operating environment. Recent reports from those close to UK trade discussions suggest that there may be another shift in arrangements on the horizon. If anyone in UK manufacturing was expecting a quick and easy transition to the new arrangements, then they will be disappointed.

How We Got Here

This time 12 months ago, the government was putting the finishing touches to the Trade and Cooperation Agreement to meet the deadline of the end of 2020.

This agreement was intended to set out the trading relationship between the EU and the UK once we were out of the European Union once and for all. The TCA established a system of no tariffs or quotas on the movement of goods we produce between the UK and the EU. However, this was not quite as straightforward as it appears, with all sorts of new rules and paperwork around what constituted good that are produced in the UK. We wrote about this earlier in the year.

Teething Troubles

However, since the ink dried on the deal, there has been a series of knock-on impacts that have slowly become clear as the year has progressed.

Some of these have been headline news. We have recently written about how supply chains have been impacted, both by the movement of goods but also large skills gaps in the logistics workforce. The shortage of HGV drivers, for instance, has impacted on ourselves and others in the sector. As a nation, we are hugely reliant on road transport. Reduced capacity in the logistics sector affects us all.

As we head towards Christmas, expect to see an increased highlighting of these challenges. If people in the UK are unable to buy their usual Christmas products, then there will be a media focus on the reasons that sit behind these.

And this is not just an issue that impacts on the relationship with end consumers. It also affects businesses like ENL Group, which import materials from overseas and exports components to international markets.

However, whilst these might be seen as understandable teething issues, what is becoming clear is that some of the challenges are really quite fundamental. In fact, some analysts are predicting that they could lead to the suspension of the recently agreed TCA, and the start of another protracted period of negotiations, bringing another period of uncertainty for UK manufacturing.

Why Northern Ireland Matters

At the centre of these is Northern Ireland, and something called Article 16 in the TCA. This might sound like a minor issue, especially for companies that do not operate in Northern Ireland. But, in reality, it is something that could have profound consequences for everyone involved in importing and exporting goods to and from the UK.

This is because the terms of the TCA effectively meant that Northern Ireland remained in the EU’s single market. This was to allow goods to flow easily and freely between the Republic of Ireland and Northern Ireland, removing the threat of a “hard border”. However, that also means that goods arriving into Northern Ireland from elsewhere in the UK needed to be checked. This meant that, in reality, there became a border in the Irish Sea.

The UK government increasingly believes that this is not working. Article 16 is the part of the agreement that sets out the process for either side to take unilateral “safeguard” measures if they believe that the deal is leading to practical problems. These safeguard measures would amount to suspending parts of the deal. There has been lots of speculation in recent weeks that the UK is close to triggering Article 16, which would suspend parts of the Northern Ireland Protocol. If it does, then there will be consequences for companies right across the UK.

Wider Impacts

Why would triggering Article 16 matter to wider UK manufacturers? Well, if the UK triggers Article 16, then the EU can take what are referred to as “rebalancing actions.” These could include challenging the UK action in court, imposing tariffs on UK goods, or even giving notice that the EU intends to terminate the whole agreement. 

If that happened it could effectively reopen the whole set of negotiations that we had hoped were behind us. It could start the clock ticking again on a new set of negotiations and possibly even set a course for a no-deal Brexit, with tariffs on a broad range of goods and other significant barriers to EU-UK trade.

The Need for Stability

The last few years have been difficult for UK manufacturing due to the amount of uncertainty that we have seen. Businesses need stability to plan. Without knowing what future rules are makes it difficult to invest in new machinery or production facilities, or to develop new relationships with suppliers and customers overseas.

At ENL Group, like all businesses, stability in the operating environment is critical for us to plan and grow. However, what the last few years have taught us is that we cannot rely on the political environment to deliver stability. There are too many moving parts that can impact on us. That is why we have increasingly focused on looking instead at what we can do ourselves. For instance, we have taken our own steps to provide stability for our customers to ensure that they always can source the high-quality plastic components that they need. We have shortened our own supply chains, and increased our capacity to store materials on behalf of customers.

If news reports are to be believed, the operating environment may be about to become uncertain again. However, we believe by developing our own processes, we will be well placed to provide the sort of ongoing service that our valued customers expect.

About ENL Group

ENL Group is based in Portsmouth, UK, and Veľké Kostoľany, Slovakia. Established in 1958, we have been servicing UK-based and European companies for decades. Working with a secure supply chain, ENL provides quality components for quality-driven customers – with full certification for all of our products and quality checking at every stage.

Operating 24/7, we design, manufacture, and deliver critical components for our customers across the UK and Europe.

Contact Us for more information about ENL and how we can help your business.