Urgent need to tackle Brexit red tape threat

Urgent need to tackle Brexit red tape threat

Fresh warnings to industry to continue with preparations for a hard Brexit have come hot on the heels of the cross-party moves in the British House of Commons to block a no-deal Brexit.

Some commentators still believe British prime minister Boris Johnson’s bull in a china shop tactics could result in a crash out at the end of October.

The European Commission is taking no chances and released fresh instructions to member states on how to handle a hard Brexit.

Tánaiste Simon Coveney and Minister for Business, Enterprise and Innovation, Heather Humphreys appealed to businesses to accelerate their preparations as did half of the Cabinet.

However, the advice from Government support has mainly been focused on the problems that may arise at the physical border to the North and the sea and airports.

The difficult legislative issues that will arise in the case of a hard Brexit have been largely been ignored. These legislative issues, which many businesses now call the "virtual border", indicate it could be more disruptive than any physical border delays and customs issues.

These virtual border issues range from the EU food safety labelling, country of origin marking, GDPR information exchange, REACH directive for all chemicals and onto the CE Mark Directive which applies to a wide range of manufactured goods from toys to medical devices.

In all, there are close to 4,000 pieces of legislation which would impact on imports from the UK in the event of a crash out at the end of October, with the potential to grind many businesses small and large into difficulties.

Whereas Customs authorities expect that import tariffs will only apply to 18% of goods imported from the UK in a crash out situation, which they will manage at the physical borders, the legislative requirements will affect virtually all of the goods imported from the UK.

Managing this latter issue is a growing worry for business and one which has not been given much attention by the Government agencies.

In attempting to assess the regulatory impact of Brexit, businesses have been working from the knowns and applying educated guesswork on the anticipated impacts of regulations already in-train.

Here’s a quick snapshot of the expected impacts of Brexit on a number of key regulations. Let us take the example of the EU food safety and labelling legislation.

It states that the name and address of the food business operator must appear on the label of goods marketed within the EU.

If that operator is not established in the EU, the business name and address of the importer bringing the goods into the EU market must be provided on the label.

As a vast range and volume of food products we eat in Ireland comes from the UK, importers will have to re-label all these goods with their Irish address before selling them here.

The costs on compliance could be very significant for food importers who supply supermarkets up and down the country.

Businesses who import any of the 143,000 chemical products covered by the REACH directive will also be faced with high costs.

Many of these companies import from UK manufacturers who have gone through the rigorous and costly process to have their chemical products tested and approved by the EU agency based in Helsinki.

Following a hard Brexit, they would find themselves faced with doing their own re-registration to continue using their UK supplier at an estimated cost of €10,000 per product on average.

The longer-term impacts of the decision to leave the EU on the overall regulatory framework for Irish business are dependent, in part, on the future relationship that the UK seeks with the EU.

There has been much speculation over what form this will take, with some commentators referring to models such as the Norwegian EEA, the Swiss bilateral model or the Turkish Customs Union.

In reality, the future proposition is largely unknown as it will depend on the outcome of the debate in the British houses of parliament and whether there is a hard or soft or perhaps no exit from the EU.

But in all likelihood, when the political dust settles, there will be a bespoke UK solution, not wholly aligned to any existing EU-like model.

A more proactive approach from the Government and the state agencies to assist industry to manage the regulatory mountain, as we reach the Brexit endgame, is now needed.

John Whelan is managing partner of international trade consultancy The Linkage-Partnership

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