Suppliers and manufacturers of technical textiles that do a significant amount of business in the European Union (EU) face an anxious few months as the UK and the other 27 member states (EU27) continue their discussions about the nature of trade between the two sides after March 2019, when the UK’s membership of the EU will end (popularly referred to as “Brexit”). More than half way through the proscribed two-year talks, there remains a great deal of uncertainty about the outcome of these difficult discussions, already a destabilizing factor for industry, and the result, whatever its form, will have a considerable impact on how easy or hard it will be for businesses to continue to operate with their current markets and supply-chain partners.
If no agreement can be reached by the deadline, the UK and EU27 will default to trading under the terms of the World Trade Organisation (WTO), a scenario known as “hard Brexit”, which would mean the introduction of tariffs. In terms of the respective technical textiles industries, neither side would fare well: the EU27 bloc is by far the biggest market for the UK and the UK is an important market for the EU27. Analysis by the Brussels, Belgium-based European Apparel and Textile Organisation (Euratex) predicts duties of 4–5% being imposed on yarns, rising to 8% for fabrics and 12% for finished products. Although politicians might imagine the two sides separating cleanly, the reality for business is that nearly all supply chains currently cross backwards and forwards across this looming divide, and, compared with many other products, technical textiles disproportionately rely on good cooperation along such chains.
Tariffs are not the sole issue, there will also be a need to agree a regulatory and legal framework for trade, which is likely to make life more difficult, if not impossible in extreme cases, than is currently the case, where all 28 members operate under a single system. UK manufacturers applying chemicals to textiles to add functionality, for instance, are currently subject to the jurisdiction of the European Chemicals Agency (ECA), with some disputes resolved ultimately by the European Court of Justice, the latter anathema to many influential UK politicians. Currently, both sides are far from any accord about how this sort of regulation will operate post-Brexit. Industry on both sides of the divide is rightly concerned that, whatever the solution, the result will be the need for duplicated testing and registration, leading to increased costs.
Standards, such as those for personal protective equipment (PPE), are another headache for the industry, which is strongly in favour of the current status quo, where all are bound by the same ones. While the good news is that the UK plans effectively to retain EU law in this respect (repealing the existing legislation, but immediately re-instating it as national law), there is still a need for the EU to agree to this solution and the real danger of future divergence.
With only nine months remaining, the signs are worrying: Senior Ministers in the UK Government are still arguing among themselves as to what it is that they want to achieve and, even where they do know their goals, the EU negotiators have already identified several as completely unacceptable. Further, if the UK Government cannot agree among itself, how difficult will it be to sell any deal reached to the 27 remaining states of the EU?
The history of the EU's negotiations (internal and external) suggests the talking will go on to the last possible moment and that some sort of deal will result. However, any political compromise that makes existing trade and cooperation even slightly more difficult could still be devastating to many of the small and medium enterprises (SMEs) that constitute the technical textiles sector. While they wait, the only certainty is that these companies should prepare for the worst case scenario—hard Brexit.