The impact of Brexit on the aerospace sector Contents

Conclusions and recommendations

Trading with the EU after Brexit

1.As a result of the WTO Agreement and the EU’s Inward Processing Regime, tariff barriers are not a significant concern for the UK aerospace sector after Brexit. The Government should integrate the relevant articles of the EU’s Inward Processing Regime into any future UK customs code in order to ensure that the sector can continue to import raw materials for use in aerospace without incurring duties. (Paragraph 12)

2.It is in the UK’s national interest for its aerospace sector to remain deeply integrated in European supply chains after Brexit, and there is little to be gained for this sector by not having closely-aligned customs. Any additional customs procedures resulting even in relatively short delays could detract from the UK’s industry’s ability to compete for work and investment in those supply chains. We recommend that the Government should seek to secure as near frictionless trade as possible between the UK and EU for the aerospace sector after Brexit, with the minimum amount of customs procedures. (Paragraph 18)

Regulatory realignment

3.The most straightforward way for UK aerospace to avoid double certification after Brexit would be for the UK to remain a member state of EASA and its network of Bilateral Aviation Safety Agreements. (Paragraph 27)

4.It may be in the UK’s national interest to reassess its degree of regulatory alignment with the EU in the aerospace sector in future, in a predictable way that provides certainty for the industry. However, the evidence submitted to this inquiry decisively favours maintaining a high degree of alignment after Brexit. (Paragraph 28)

5.The evidence we have received from aerospace businesses, unions and academia is unanimous in support of the EU continuing its membership of EASA. Close global regulatory alignment in aerospace has resulted in benefits in terms of safety, the ease of global trade and efficiency, while it is unclear that there are any benefits from divergence at this time. Accordingly, the Committee notes and welcomes the Prime Minister’s statement in her Mansion House speech on 2nd March 2018 that the Government will explore with the EU the terms on which the UK could remain part of EASA, with the consequent appropriate financial contribution. (Paragraph 29)

6.In its negotiations with the EU, the Government should prioritise maintaining the UK’s EASA membership, while retaining as much influence within EASA as possible. At present, EASA’s regulations preclude the UK retaining its voting rights as a non-EU member state. The Government should seek a deal to retain those voting rights; however, even without voting rights, the UK is likely to retain greater influence on global aerospace regulation from within EASA than without. (Paragraph 33)

7.In practice, ECJ judgements have not been an issue for the aerospace sector. In her Mansion House speech on 2nd March 2018, the Prime Minister acknowledged that “the decisions of the ECJ will continue to affect us” after Brexit and said that if “the UK should continue to participate in an EU agency the UK would have to respect the remit of the ECJ in that regard.”84 This is preferable to the alternative of securing an escape from ECJ jurisdiction at the cost of influence in EASA. The Committee welcomes the Government’s pragmatic approach, which is especially suitable for the aerospace sector and regarding ECJ jurisdiction over EASA. (Paragraph 36)

Trade opportunities after Brexit

8.The Government’s priority in terms of opportunities for aerospace to trade beyond the EU after Brexit should be to secure the roll-over of EASA’s existing BASAs. This could be achieved by maintaining the UK’s membership of EASA in some form. (Paragraph 39)

9.The Government should also aim to secure UK participation in these and any other future agreements. (Paragraph 40)

10.In the case of aerospace, the trade-off between regulatory harmonisation and as frictionless a customs arrangement as possible, against the ability to strike trade deals globally, is decisively in favour of the former, which should be the Government’s priority. Indeed, EASA’s agreements with the likes of the United States and China suggests that the two aims are complementary, and that close harmonisation with the European and global aerospace regulatory regimes are likely to enhance, rather than diminish, the UK’s access to all global markets. (Paragraph 41)

The impact of leaving EASA

11.It is clear that leaving the EU and EASA with no deal would be highly costly and disruptive to the UK aerospace sector and aviation, as well as its EU counterparts. Given that no alternative arrangements are being developed, the Government should rule out this possibility. (Paragraph 44)

12.If the UK is to make a managed departure from EASA, it would require a transition period in which special arrangements are made with the EASA, the US Federal Aviation Authority and other global regulators. The Civil Aviation Authority would need to undergo a major investment and recruitment programme if it is to take over the functions of EASA at some point in the future, and Bilateral Aviation Safety Agreements with mutual recognition agreements would need to be negotiated with the EU, US and other major markets. Given the complexities involved, this transition may need to last beyond the two years that the Prime Minister has said is likely to be appropriate for the economy-wide implementation period. This disruptive and costly process is unlikely to result in any significant divergence in regulation. Continued membership of EASA is clearly preferable. (Paragraph 47)

Skills

13.The Government should prioritise ensuring that our key manufacturing sectors such as aerospace retain sufficient and timely access to essential skills. The Government should seek to maintain the UK’s openness to skilled workers from the EU, as well as looking to which skills and qualifications could be attracted from beyond the EU. (Paragraph 49)

14.The Government should ensure that intra-company transfers and posted worker arrangements are flexible, rapid and require the minimum level of administration after Brexit. (Paragraph 50)

Research and development

15.The Government should seek to maintain the UK’s membership of Horizon 2020, the Clean Sky Joint Understanding and other collaborative R&D programmes, and secure UK participation in future programmes. In doing so, it should recognise that the primary benefit of these programmes for the UK comes from the cross-border collaborative opportunities they offer, rather than the financial return, and form its negotiating priorities accordingly. (Paragraph 53)

Certainty and clarity

16.It is in the interests of the UK and the EU27 that both sides in the Brexit negotiation reach a firm agreement in the coming weeks on the arrangements for a transition or implementation period after March 2019, to avoid firms having to commence costly contingency plans. Looking beyond transition, the Government and its EU counterparts should also offer clarity on the future UK-EU relationship as soon as possible, so that firms on both sides can invest with confidence. (Paragraph 57)





Published: 19 March 2018