How will Brexit affect the rail supply sector?
The rail supply sector is a significant contributor to the UK economy worth around £36 billion each year to our national P&L account.
With around 600,000 people being employed in the sector, a tax yield to the Treasury in the region of £11billion a year, and generating an estimated £800 million per annum in exports it is a key part of what we do as a nation.
On top of this, the rail network is a crucial part of our national infrastructure. It facilitates the movements of goods and people around the UK (and to /from the continent via the Channel Tunnel), and despite the operating issues that manifested themselves last May, the ability to do this in an efficient and timely basis is key to the country’s economic prospects.
The current uncertain picture surrounding Brexit raises some key challenges and opportunities for the rail supply sector which were highlighted in an interesting recent article by Damian Testa of the Rail Industry Association published in Rail Magazine last month. The main points raised are outlined below:
Smooth cross border trade must continue.
The rail sector is a key customer and supplier to many other industrial sectors both within and outside of the EU. It is crucial that access to these markets is maintained in a post Brexit landscape. Additionally, it is important that any new Customs requirements are as user friendly as possible following withdrawal from the EU Customs Union to keep the administrative and cost burdens on business within the sector to a minimum.
Access to a skilled workforce must be maintained
Around 20% of the workforce within the rail sector are of wider EU origin. The potential loss of these workers, along with an already ageing worker profile in the sector could see a skills gap emerge leading to delays and cancellation of projects, and cost increases associated with a scarcer supply of skilled labour.
There needs to be measures put in place to attract and train more UK workers for the sector.
Clear and consistent application of railway standards must be kept
The technical standards applied throughout the rail sector are EU based standards. This allows products made in the UK to be used throughout the EU – A great aid for exports, economies of scale in the production and delivery process, and overall competitiveness of the sector.
These could all be threatened if the UK stopped recognising these EU based standards post Brexit.
In addition, if EU based standards were dropped and UK became an island of non-standardisation it could prove to be a disincentive to investment from overseas as manufacturers may need to establish separate product lines solely for the UK market.
The Government’s current proposal to no longer have a formal relationship with the European Rail Agency is of concern to the sector as the ability to influence the development of international operating standards is seen as key to maintaining access to global rail markets.
The ability for businesses with the rail supply sector to trade and operate within European and wider international markets on a competitive basis is crucial to the future health of the sector.
The prospect of the UK being able to take control of its own trade policies and agreements gives an opportunity for the UK Government to enter into dialogue with key overseas markets so that agreements can be reached as early as possible.
Call for action
Uncertainty acts as a check to business confidence and investment plans. Therefore early clarity in these keys areas of challenge and opportunity is required so that the rail supply sector can continue and grow its already valuable contribution to the wider UK economy.
The full article can be found in Issue 868 of Rail Magazine.
Paul Wormald, partner at Hawsons Chartered Accountants commented: “The current uncertainty surrounding what the post- Brexit landscape looks like is a concern for businesses generally. Damian’s article brings into focus the key challenges and opportunities for the rail supply sector. Based on feedback from the RIA’s members, it highlights what is keeping those running businesses in this sector awake at night.”
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