No Brexit deal would mean a ‘painful and costly’ EU departure, manufacturers warn

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Theresa May’s suggestion that no Brexit deal was better than a bad deal risked condemning UK manufacturing to a “painful and costly” exit from the EU, an employers’ body warns.

EEF, the largest organisation representing the manufacturing and engineering businesses, said losing access to the single market and the customs union would be “simply unacceptable”.

Manufacturing accounts for 45 per cent of all UK exports, EEF said in a report published on Monday. Any damage to the sector could severely hurt the economy.

The stark warning to the Prime Minister comes as she readies to trigger the start of negotiations to exit the EU this week.

EEF urged the Government to clarify its position on the customs union and customs arrangements. Without a favourable trade deal, average tariffs for manufacturing exports to the EU could be expected to increase by approximately 5.3 per cent, the body said.

“The EU is our sector’s single biggest trading partner in a complex, tightly interwoven trading environment,” said Terry Scuoler, the chief executive of EEF.

“Undermining the building blocks of this relationship – the single market and the customs union – without any other supportive structure in place would undoubtedly hurt our industry and condemn us to a painful and costly Brexit."

Mr Scuoler said Ms May’s brinkmanship may be a negotiating tactic, “but it would in reality deliver a risky and expensive blow”.

“The rhetoric from the Government needs to focus instead on achieving a deal that will work for the UK and the EU,” he added.

The report argues that, unlike typical trade negotiations, where walking away means the continuation of the status quo, if the UK leaves the EU with no preferential access, it would immediately find itself at a disadvantage.

UK manufacturing is particularly vulnerable because 52 per cent of the sector’s exports by value went to the EU last year, the EEF said. Some of its members report that due to the nature of their production processes, components can cross European borders multiple times, meaning they could face large increases in tariffs and administrative burdens.

Analysis by The Independent has found the damage to Britain’s goods exporters of leaving the EU without a new free trade deal in place would be at least £4.5bn a year – a figure that could multiply.