Brexit Could Cost U.K. Aerospace $2 Billion, Lobby Group Says

(Bloomberg) -- Britain’s exit from the European Union could cost the U.K. aerospace industry 1.5 billion pounds ($2 billion) in extra customs expenses, the sector’s national lobby group said in a submission to lawmakers.

The sum would come from “increased checks at the border” if British and EU processes do not remained harmonized, ADS Group said in evidence to Parliament’s Business, Energy and Industrial Strategy Committee. Additional burdens such as paperwork on proof of origin, regulatory compliance, storage and delays could total 15 percent of the value of each transaction, it estimates.

The potential expense “is extremely worrying and risks making our aerospace industry less competitive and driving up costs at a crucial time for our economy,” Rachel Reeves, the opposition Labor lawmaker who chairs the committee, said in a statement. That in turn “could have a negative impact on future investment decisions,” she added.

The committee will take evidence Tuesday from industry representatives including ADS Chief Executive Officer Paul Everitt and Katherine Bennett, vice president of Airbus SE’s U.K. arm. It will also receive written submissions from companies including Boeing Co., as well as from the Department for Business, Energy and Industrial Strategy.

ADS said that since aerospace is already largely tariff free thanks to World Trade Organization agreements, limited gains from free trade accords that Britain might strike with non-EU countries won’t be sufficient to offset the higher customs expense. It also highlighted the continued alignment of U.K. and EU aerospace regulations as “vital,” including full British participation in the European Aviation Safety Agency, and said that there should be continued participation in EU-funded research programs.

Prime Minister Theresa May is currently locked in a Brexit standoff as European leaders set her a deadline to give ground on the exit bill and the future of the Irish border if talks are to move on to trade before next year. With a transition period yet to be agreed, businesses are increasingly concerned negotiations could end without an agreement.

The U.K.’s Ministry of Defence has canceled or paused several contracts in the past few weeks according to a bleak trading update by supplier Ultra Electronics Holdings Plc.

To contact the reporters on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net, Thomas Seal in London at tseal@bloomberg.net.

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Anthony Palazzo at apalazzo@bloomberg.net, Christopher Jasper, Kim Robert McLaughlin

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