U.K. aerospace warns Brexit deal threatens parts production

U.K. aerospace-industry trade lobby ADS warned that Britain could lose business to the European Union after the Brexit deal failed to resolve issues concerning design-approval for plane components.

Almost four months after the trade deal was struck, firms are still struggling to secure EU signoff for British-designed parts and approval for maintenance work on planes registered in the bloc, ADS said. At the same time, the U.K. Civil Aviation Authority is granting automatic recognition to rival European players.

“We’re in a no man’s land,” Jonathan Hawkings, the industry group’s policy director, said in an interview. “If U.K. companies are unable to demonstrate how they’ll get approvals but a competitor in the EU can, there’s a real risk that work just moves to the EU27.”

While the CAA assumed responsibility for certifying aircraft parts and design after Brexit, the European Union Aviation Safety Agency has yet to grant it full recognition, saddling British firms with red tape and higher costs. Companies including Airbus SE and Rolls-Royce Holdings Plc have shifted design-approval functions to the Continent to get round the issue, but some businesses don’t want to do so without clarity on what the long-term relationship will look like.

Technical talks on implementation of the aerospace aspects of the trade deal are ongoing and may resolve some design-approval issues. Aircraft maintenance, for which Britain is a major focus, is not part of the accord and ADS wants the agreement to be developed further in that area.

Breathing Space

“It’s too early to tell whether this is a major perturbation in the business model or a temporary blip,” said Kevin Craven, ADS’s interim chief.

Jefferies analyst Sandy Morris said there’s unlikely to be an immediate shift of jobs and work to the EU, since supply-chain changes tend to accompany new plane and engine programs, providing breathing space to resolve the issue.

The U.K. Department for Transport said the government is actively supporting industry over the aviation safety agreement and that technical implementation procedures “will be in place as soon as practically possible” under the Brexit trade arrangements. The CAA said it couldn’t immediately comment.

Aerospace firms in Northern Ireland face further issues after the creation of an effective trade border in the Irish Sea to avoid the need for politically incendiary controls on roads into the Irish Republic.

While the sector is ordinarily exempt from tariffs, an annex to the Brexit deal imposes levies on raw materials entering Northern Ireland that are then processed to form another product. ADS say that’s costing 90 or so mainly small companies about 65 million pounds ($91 million) a year.