The issue continuing to dominate Westminster this week is that of the customs union. The Prime Minister, who fielded further questions on the topic at yesterday’s PMQs, has now made her position unequivocally clear: the UK will be leaving the customs union.
However, initial reactions suggest that the issue may not be as clear cut as the Prime Minister would like to make out. Earlier this month the House of Lords voted that Britain should stay in a customs union with Europe, and with Labour and a clutch of Tory rebels also in favour, the Commons may soon follow suit. This may not be wholly bad for the Prime Minister and an article in this week’s Sunday Times credits a source from within No. 10 as saying: ‘We wouldn’t cry into our beer if we were forced to do this.’ In addition, the Prime Minister is yet to suggest a plausible solution to the problem of the Irish border, with the two alternative solutions being promoted by Mrs May being denounced as “unworkable” by EU officials in Brexit talks last week.
Ultimately the problem Mrs May now has is a political one. The EU customs union has been hugely successful at enabling frictionless trade between the UK and the rest of its European neighbours, by allowing goods to move openly across the entirety of the EU. The Prime Minister knows that it is in the best interests of the UK economy, and thereby the UK as a whole, for this to continue. However, she must be seen to be delivering the Brexit the UK wants, which it has now been decided includes formally leaving the customs union.
At the same time, our exit from a customs union would suffocate the manufacturing that depends on the free transport of goods in and out of the UK. Manufacturing in the UK has been in decline for decades, something the UK Government has long recognised. As such, it has sought to introduce numerous incentives to try and get Britain making again.
This includes increasing high value manufacturing, such as that of advanced medicinal products, and the Life Sciences Sector Deal, which was published in December 2017, saw the Government commit a total of £162m to improve pharmaceutical manufacturing infrastructure in the UK. This will be achieved through the creation of two new national centres – the Medicines Manufacturing Innovation Centre and Vaccines Development and Manufacturing Centre – and is a clear signal that supporting the growth of medicines manufacturing remains a priority within Government.
Although the production of advanced therapies and medicines may not be what people typically first think of, it is arguably one of the UK’s most important manufacturing sectors. Recent statistics show that the pharmaceutical sector alone generates a £1.1bn per annum trade surplus, greater than any other industrial sector in the UK. Pharmaceutical manufacturing employees also have the highest Gross Value Added of any high-technology sector – over £330,000 per employee. It is also a large scale employer, creating exactly the type of high value jobs that the Government believes should form the future backbone of the economy.
The industry trade association, the ABPI, has made clear that its members favour a system which continues to allow trading terms that are equivalent to those of a full member of the EU customs union. This is not least because of the infinitely complex way in which modern medicinal products are manufactured, often being sent across borders numerous times before a final product is produced. As a result, the introduction of even ‘frictionless’ border checks could have a significant impact and any disruption to this process could also create supply shortages, which also threatens putting patient safety at risk.
The danger of potential disturbances to the medicine supply chain is likely to be enough to spook many manufacturers, who may seek to relocate production plants to within the relative safety of mainland Europe or Ireland. For the time being at least, it would appear industry is willing to play along and has delayed taking any dramatic action, but as the UK gets closer to the Brexit deadline, it is unclear if this will last.
So if the Brexiteers do get their way and the UK does leave the customs union, the pharmaceutical manufacturing sector may be infinitely poorer because of it.