A no-deal Brexit threatens the viability of the aeronautics and chemical industries in both the UK and the EU

Divergence of regulation is the biggest fear and a no-deal is the worst scenario for the aeronautics and chemical industries.

In the event of a deal, the UK should stay aligned with EU laws; for chemicals, the REACH regulation is key.  As for the aeronautics industry, agreements on reciprocity in the most important areas should be put in place. The planned transition period is too short, however, and should be extended to at least five years.

This was the bottom line of a discussion with high level experts of the aeronautics and chemical industries, organised by the Consultative Commission for Industrial Change (CCMI) at the European Economic and Social Committee (EESC) on 30 January.

It is crucial to find reciprocity solutions in the main sectors otherwise both parties – the EU and the UK - will lose out, warned Jan Pie, secretary-general of the AeroSpace and Defence Industries Association of Europe (ASD). The transition period, however, is too short and from our perspective we would need at least five years to adapt to the new situation.

While new tariffs were a challenge to Europe's competitiveness, the impact would for the most part fall on the supply chain in the event of a no-deal because just in time delivery needed a smooth supply chain. Since the aeronautical supply chain was highly transnational, components often had to cross the Channel several times before the product was finally assembled. A blockage of only one item could already bring the whole supply chain to a halt. The same also applied to the movement of workers: specialists needed to move quickly between Britain and France, or Spain or another EU country, and back again. Any restrictions would inhibit smooth production.

The ASD spoke on behalf of 3 000 companies, but there were around 80 000 different suppliers. The major concern of these enterprises was that putting new bodies in place in the UK on the one side and retaining the existing EU-27 ones could create divergence in the future.

The relocation of enterprises in order to escape the uncertainty, however, was not an easy decision, given that there were often many sub-suppliers involved – in the case of Airbus, for instance, they numbered around 5 000.

A Brexit deal was also indispensable for the chemical industry, underlined Ian Cranshaw, head of international trade at the Chemical Industries Association (CIA). With a turnover of GBP18 billion, the chemical industry was of crucial importance to the United Kingdom. It provided 500 000 jobs indirectly, with another 150 000 people directly employed, many of them in high quality jobs located not only in the cities but also in the regions. What the industry needed most was certainty. UK companies had invested GBP 6 million to comply with REACH, and the industry welcomed that regulation. Therefore the concept of a UK REACH being introduced and asking UK companies to pay again for re-registration did not make sense, he argued. The UK's possible role in the ECHA also needed to be discussed.

Mr Cranshaw's organisation had conducted a survey among the companies it represented and not a single company had come back saying that Brexit would benefit them, he told the audience.

The risk of divergence and deregulation

The British and EU chemical sectors were strongly interconnected, and from the onset of Brexit negotiations it had stood united in favour of an agreement for frictionless trade in chemicals. A no-deal needed to be averted, said Rene von Sloten, executive director of the Industrial Policy Programme at the European Chemical Industry Council (CEFIC). He too underlined regulation as the industry's key area of concern. We are convinced that the UK should be included in the EU REACH regulation and also in the ECHA, he said.

Kate Young, Brexit and chemicals campaigner at CHEM Trust warned that it was essential to keep a level playing field. The UK should aim to stay as close as possible to REACH, which should in turn be translated into UK legislation.

REACH had never been popular in the US, she said, and in its search for a good trade agreement with the US the UK could become more aligned with the US, meaning that the regulations of the EU and the UK could diverge.

In her statement, Jacqueline Foster, Conservative Party Member of Parliament for 15 years, confessed that she had already voted against the UK staying in the "Common Market" back in 1975. There won't be a second Brexit referendum, she said, the government needs to carry out the process to the end.

The UK had played a key role in setting up responsible legislation in the EU. It would not water down any standards, she argued and called for a grown-ups' divorce that included reciprocity and a seamless process on how to take industries forward.

Luc Tytgat, strategy and safety management director at the European Aviation Safety Agency (EASA) informed those present that the EASA had received several applications from UK operators. He underlined that as an industry policy organisation they were prepared to deal with any options.

Only losers?

Leaving the EU also meant losing the EU's airspace for the UK and the need to negotiate bilateral agreements, predicted Mia Wouters, director of the European Aviation Club and professor of Air Law at University of Ghent.  Nobody is ready for Brexit yet and it could end up in chaos. People have not been informed of what is at stake, she concluded.

During the discussion, other participants also expressed their disappointment regarding the staggering amount of uncertainty still surrounding the UK's exit from the EU just two months before the final divorce, and were wondering if the British people had really been aware of the negative impact of their vote. 

CCMI president Lucie Studničná recalled that the EU's intention had always been to discuss and anticipate developments in order to limit the negative impact. The goal had always been to create a win-win situation.

Now it looks as if we are all only losers. The lesson we might draw from this situation is to better communicate the achievements of the Single Market and the many advantages – for both industry and the citizens – that come with EU membership, she said.

The question as to who at the end of the day would benefit from Brexit remained unanswered.