Brexit: "ready" is not an option

18/10/2020

Having written so much about the effect of Brexit on the aviation industry, it is interesting to see how some firms are adapting to the new reality.

Taking one at random Interflight Aircraft Maintenance based at Biggin Hill, we see the company pleased to announce that it has been granted EASA Third Country approval in preparation for Brexit. This approval, it says, "allows us to continue to work on European EASA registered aircraft following Brexit".

This is good news and bad news for the company. Although the approval allows it to continue to work on European EASA registered aircraft, this comes at a price. Based on the EASA Charges Regulation and the size of the company, we are probably looking at a one-off approval fee in the order of €40,000 plus an annual "surveillance" fee in the order of €30,000.

This is just for the basic "Maintenance Organisation Approval" and it will be paying a lot more if it has applied for "Third Country Continuing Airworthiness Management Organisation Approval" (€52,950), plus the annual surveillance fee of the same amount.

The point here is that had the rather optimistic Government report, "Aviation 2050 - The future of UK aviation" (published in December 2018) come to pass, we would be looking at a Comprehensive Air Transport Agreement, the text of which has been proposed as the basis of an agreement between the UK and the EU.

This would mean that the company and the many others like it would be able to rely on UK CAA certification rather than, as currently expected, having to double up on fees – one set for UK registered aircraft and other for EASA registered aircraft (although the UK will continue to recognise EASA certificates, approvals and licences for use in the UK and on UK aircraft for up to two years after the Brexit date).

It is no surprise, though, that this draft agreement does not seem to have been pursued. The text illustrates much that is wrong with the UK's approach to the "future relationship" negotiations, as the entire aviation safety component of the agreement (Chapter 3) extends to only just over a page of A4 text, effectively demanding unconditional mutual recognition of standards, based on the UK applying the minimum standards set out in the Convention on International Civil Aviation.

This compares with the US-EU Bilateral Aviation Safety Agreement (BASA), the consolidated version of which runs to 137 pages. And here, despite the global dominance of US FAA standards, there is no question of mutual recognition.

Instead, there is what is known as "reciprocal acceptance" of findings of compliance and approvals, when the Parties agree that each Party's civil aviation standards, rules, practices and procedures "are sufficiently compatible to permit acceptance of approvals and findings of compliance with agreed upon standards made by one Party on behalf of the other".

Overlaying this is a complex system of executive management, with representatives of the FAA and EASA, backed by numerous technical working groups, which are responsible for ensuring the effective functioning of the Agreement.

The slender content of the UK proposal and its blithe – even arrogant - assumption that the EU would afford to the UK something which it does not even concede to the mighty United States, could easily be taken as an insult. It certainly does not demonstrate any attempt to undertake serious negotiations in this highly technical area.

Small wonder, therefore, that Interflight Aircraft Maintenance – and doubtless many firms like it – have gone for the EASA approval route, despite the cost implications. In the post-Brexit UK, this will be the cost of doing business. And not yet do we know the total, extra cost, but it is bound to amount to many millions of pounds.

At least in aviation, though, there is some prospect of an agreement which allows for the "reciprocal acceptance" of standards – although no such agreement looks likely in the short term - even if the UK and the EU do eventually agree a trade deal before the end of this year.

But when it comes to many other industries, there is no such facility. Specifically, when it comes to car manufacturing (whole vehicle type approvals), pharmaceuticals and chemicals, there are no such mechanisms. Export to the EU requires full conformity with EU standards, raising the unavoidable prospect of UK manufacturers having to produce to dual regulatory regimes – as is the current fate of the aviation industry.

What is worrisome about this is that there seems to be very little recognition or understanding of the situation. In The Times editorial for Saturday, for instance – headed "Keep Talking" – the paper observed that failure to reach a trade deal would be a blow for Britain and the European Union. "Both sides", it said, "need to find a solution".

The paper then goes on to say that a no-deal outcome would be particularly bad for Britain, with hardly any sector that shares Johnson's belief that the country could "mightily prosper" without a deal.

It then tells us that, for industries that are deeply integrated into EU markets, such as car manufacturing, pharmaceuticals and chemicals, the increased costs and disruption to supply chains arising from new customs checks, tariffs and loss of regulatory permissions on everything from product standards to data sharing would be highly damaging.

Thus, the paper concludes that, "to inflict such costs in the middle of a pandemic would compound it", suggesting that such costs are concomitant on a no-deal scenario.

This would seem to be a very specific example of a failure to understand the situation, with the assumption that increased costs could be avoided if we agreed a trade deal with the EU. Clearly, this is not the case.

And yet, such a blinkered view is not confined to this newspaper. In the Sunday Times today, we have the headline, "Michael Gove now accepts the case for a no-deal Brexit", where he warns Brussels that Britain is "well prepared" for a no-deal Brexit and will brave the "turbulence" to go it alone, because the EU has refused to give any ground.

But not in any sense could it be said that Britain is "well prepared" for a no-deal Brexit and, when it comes to the regulatory onslaught facing car manufacturing, pharmaceuticals and chemicals, there is no possible way that these industries could prepare, deal or no deal. To that extent, it doesn't much matter whether we secure a deal or not. These industries will suffer, and the UK will be the poorer for it.

But when it comes to aviation – and other sectors – there is much relief to be found in a deal, and especially in manufacturing where a mutual recognition agreement on conformity assessment would be of considerable benefit.

Only those, it would seem, who have really no idea of what is involved in a no-deal scenario could countenance it with anything but horror and, whatever happens, any assertions that we can be "ready" for the end of the year lie in the realm of fantasy, as does dismissing the effects of a no-deal as "turbulence".

Also published on Turbulent Times.