The Ceramic sector in a post-Brexit world and conclusions
Dr Laura Cohen speech to Brexit: Ceramic Sector Summit, 29th March
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Thank you to all the speakers today – four senior officials from DIT, DEXEU, HMRC and BEIS. We really appreciate that you’ve taken time out of your busy schedules to support us and our members today. And thank you businesses for taking the time too. We know just how busy you are.
- Firstly the opportunities for ceramics beyond Brexit;
- Secondly why ‘no deal’ Brexit is so bad for many businesses – including ceramics; and
- Thirdly why political consensus on a way forward is so important now
I’ll sprinkle this with examples of how we’ve been working as BCC, the trade association representing our members – British ceramic manufacturers – and then point you to my colleagues and others in the room who can help with any questions you have.
Setting the scene, today, meaningful vote 3 failed. On Monday April 1st, the second round of indicative votes is expected. By Tuesday April 12th something needs to be passed for the deal to go ahead.
Ciara Jagger at BCC was on the CBI video conference yesterday and she reports that the economic momentum is slowing to a halt. UK GDP growth indicators are subdued and sales and exports are starting to show decrease. Manufacturing is especially exposed because the broader global economy is sluggish. The risk of an all-out Trump trade war threatens this. No deal contingencies are continuing to pre-occupy business and the next couple of weeks will be the crunch point for the economy. Office for National Statistics data show business investment has fallen for a full year, the uncertainty is crippling business and the risks are heightened.
No deal is seen as the biggest risk to our economy. The BoE says interest rates could go one of two ways, either a few rises if there is a smooth Brexit, or the great unknown if there is a no-deal Brexit. If there is a no deal, we can expect a large scale fiscal event, but only after the initial business data has been collected.
As Kevin Oakes, our President, said earlier, we are a thriving industry, employing more than 20,000 people directly with rising exports. In short, we’re a success story. But we are at a crossroads. In a matter of weeks we’ll be forced to follow one of two paths: one route leads to a bright future, the other thwarting of our ambitions.
So let’s first talk about the bright future and the opportunities
When we surveyed our member companies before the referendum, over 70% wanted to remain.
However, we’re not so entrenched that we can’t see that Brexit presents some opportunities on energy and trade. We want to make a success of Brexit.
On energy, ceramics are fired at high temperatures, we’re an energy intensive industry. We already have some of the most energy efficient ceramic factories in the world. But the cost of implementing UK and EU policies on carbon reduction has been challenging as we still need to compete internationally. To decarbonise further we need to develop breakthrough technologies and implement them. These are large investments. Leaving the EU provides an opportunity for a different UK approach: Government could provide energy intensive companies with ‘more carrot, less stick’ (so helping us decarbonise rather than just taxing us punitively).
On trade, there are enormous opportunities from an independent UK policy if we take a pragmatic approach;
- Our sector’s excited by the prospect of a Free Trade Agreement with the United States, already a large market, despite significant trade barriers. For example, there is a mature dining out culture in America which our ceramic catering-ware manufacturers would dearly love to exploit fully, but they are faced with huge 28% import tariffs.
- The new UK Trade Remedies Authority also had the opportunity to build on the UK’s free trade credentials by tackling rule-breaking practices, such as Chinese dumping of tableware, tiles and steel. It could have been more agile, speedy and vigorous than the EU system. But, I fear some UK policy makers wrongly perceive trade remedies as protectionism. Which they are not, as they deliver a level playing field, ensuring genuine free trade, when others don’t play by the rules.
Finally, our regulatory alignment with the European Union gives us a unique opportunity to have a quick, comprehensive trade agreement. All that is needed is political will. Our members need as close and frictionless relationship as possible. After all, 57% of our ceramic exports go there.
So that’s what it could look like. That brings me onto my second point:
On why we must avoid no deal
This isn’t project fear. I’m not talking as an ideologue. I’m a practical realist who’s worked in manufacturing for over 30 years. Here are just five of many problems that will affect ceramics that you, our members, have told us about:
No Deal Problem 1 – Customs. The National Audit Office says leaving the EU without a deal will increase the number of import and export declarations from 55 million to an eye-watering 260 million per year. We’re going to be using the old and creaky CHIEF system as the Government’s new Customs Declaration Service computer system won’t be ready. We could struggle to get critical raw materials to our factories and products to our customers.
No Deal Problem 2 – Cash and investments. The prospect of no deal means cash is being tied up in stocks of raw materials and finished goods. This is instead of more productive investment to grow our businesses. And many successful businesses here have forked out for overtime as export orders have been brought forward, leaving your order books for April and May a little sparse.
No Deal Problem 3 – Confidence. The reality is no deal will lead to crashing consumer confidence and market turmoil. No deal uncertainty has also led, to some ceramic manufacturers losing orders from long-established, valued European customers. It will be difficult to get these back, even more so with ‘no deal’.
No Deal Problem 4 – Tariffs. Staffordshire pottery will have an extra 12% import tariff into the EU, making it more expensive and eroding margins. And some of our biggest non-EU markets like South Korea (third largest export market), Japan (fourth largest), Switzerland (sixth largest) and Canada (eighth largest) currently have EU Free Trade Agreements. With no deal most will be lost at least temporarily. We’ll lose customers. Many jobs will suddenly become less viable.
And Government wanted zero tariffs for all imports. We took a strong stand against this. Two concerns: it gives a leg up to foreign competitors, swamping our home market and threatening British manufacturing jobs. It also weakens the UK’s hand making free trade deals: if we give away access to Britain for free, why would anyone need to do a trade deal with us?
In case you missed it, BCC had more mainstream media appearances on this topic in February than I had hot dinners. As a result of our work, Government has agreed to maintain current tariffs on tiles and tableware – but they messed up the tariff codes initially – and they were only corrected yesterday – after a fortnight – we’ve held their feet to the fire to make sure these corrections got done and we’re checking them now. DIT outlined just now that these measures will be in place initially for 12 months. Given the cash flow issues I’ve just outlined, can businesses in our successful sector weather this? What about other sectors?
No Deal Problem 5 – Dumping. Chinese ceramics manufacturers don’t all play by the rules and they dump product here. UK tile and tableware manufacturers rely on EU measures for a level playing field. Maintaining these will be much more difficult with no deal than with a Brexit transition arrangement. Moreover the new UK system isn’t yet legally established. And the rules aren’t fully agreed – we’re still waiting for guidance. The statutory instruments had no parliamentary scrutiny – bizarrely even the cat and dog fur import regulations had a committee hearing. This really isn’t ‘vote leave and take back control’. And we may be starting on next month one of the first UK anti-dumping cases, a review of the tableware tariffs using these rules.
That the UK rules are workable for manufacturers at all is down to BCC. I set up and chair an alliance and Tom Reynolds is the secretary, of eight manufacturing trade associations, three unions and the TUC. We bridged political divides and succeeded, with Government improving the Taxation Act. For ceramics this helps improve the viability of literally thousands of British jobs that will have to deal with Trump tariffs, import surges and dumping in future.
So, having shared the Brexit opportunities and why no deal is so bad ….
It’s time for consensus
Our ceramic industry needs a deal. We desperately need MPs, rather than doubling-down on their current positions, to reach out to each other, to listen actively and to work on a Parliamentary consensus. The amendments passed in parliament makes this morally binding. We need MPs to put the country’s interests first
We’ve reinforced this message whenever we can. Since January
- I was invited to speak to Conservative party members at their Beyond Brexit summit
- We’ve had member round tables with Trade Secretary of State Liam Fox and his Minister, George Hollingbery.
- I’ve been invited to speak to two of the Caroline Spelman-Jack Dromey meetings of those MPs in all parties signing their amendment stopping no deal. The last one alongside Carolyn Fairbairn of the CBI and Frances O’Grady of the TUC, as well as Make UK and the Federation of Small Businesses.
We’ve not been neglecting Labour either.
- Johnson Tiles hosted Shadow Business Secretary Rebecca Long-Bailey in January
- Tom Reynolds hosted a round table for our members with Shadow Chancellor, John McDonnell and two of his shadow ministers
- I questioned Keir Starmer only yesterday at the British Chambers of Commerce conference
- And our daily conversations with the Labour advisers to their shadow trade and business teams have kept them updated – they want a consensus deal too…
I also have weekly meetings on this requested by with CBI and FSB and regular contact at the Chambers of Commerce nationally and the TUC.
And we have had relentless media appearances on avoiding a Brexit no deal since January:
- Last night I was on the World Tonight on Radio 4.
- I’ve also been interviewed on BBC and ITV and on Radio 4’s the World this Weekend.
- And on BBC news and ITV when ministers visited our members
- This morning, I had to post a response to former Trade Minister Greg Hands who’d penned an article in the Times Red Box saying how damaging a customs union would be for Stoke on Trent and the ceramics industry. Needless to say it was a Tory MP who encouraged me to respond – they were concerned how this guff was doing the rounds with MPs
So I want to leave you with a practical way forward.
Brexit presents some opportunities for our Ceramics sector to thrive, grow and export more. We want to make Brexit a success.
However, ‘no deal’ creates real and significant problems. It would halt our progress and push us backwards. We have influenced at a very high level to avoid it and will continue to do so.
For you, as businesses, please do use the time now to talk to our experts from Government and swap details. Get them to really answer your questions.
Please also use our brilliant team at BCC to answer any detailed questions on Brexit over a tea, or if you prefer, any spare gin from the ceramic robot-manufactured bottles! For energy issues, Andrew McDermott and Lee Brownsword are on hand. For trade it’s Tom Reynolds and Rachel Timmins. And for employment, Tom Reynolds and Ciara Jagger.
Do also talk to the DIT team based at the local chamber of commerce for advice on practical help with export documentation. I know Ron Lawley, Maggie Neale, and Wendy Hall have a big fan club with our local members.
We would encourage all ceramic manufacturers who aren’t members to talk to the BCC team and indeed other members here today.
At times like this, we have to stick together to support a thriving sector.