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20th January 2020

Divergence from EU rules

 

Sajid Javid has been quoted by the FT saying “There will not be alignment, we will not be a rule-taker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year…. We’re….talking about companies that have known since 2016 that we are leaving the EU.”

What could this lack of alignment, or increased divergence from the rest of the EU mean for UK businesses manufacturing electronics products?

The electronics industry has lots of rules and standards to follow. The vast majority of which are for safety, interoperability or to minimise environmental impacts. Ignoring the variations between interpretations of standards between test houses and notified bodies, and that of nationally imposed additional requirements, product testing in the UK meets the requirements for export to Europe and vice versa.

This standardisation means that the products across the UK and EU can currently be identical. Therefore, they can benefit from the economies of scale, design harmonisation and the volume dilution of product development across a much wider potential customer base. This benefits the manufacturer who can minimise stocked unit variations, approvals testing, technical files and certification. This also benefits consumers through the potential for an increased competition which brings higher quality and lower prices.

If a manufacturer only supplies product to the UK the increased diversification from the EU rules may bring some benefits. The UK rules could be updated to benefit British companies by imposing additional requirements that EU companies would only have to meet for UK exports.

Worth the hassle?

European exporters competing with UK companies may need to design, develop and stock both EU and UK product variants to meet the requirements of the diverging markets. Both the EU and UK targeted markets will need test approvals for both markets. EU companies may need to think hard whether the increased cost, complexity and approvals are worthwhile to access the UK market.

Some manufacturers will be able to make the business case to continue and will continue exporting product with increased costs incurred from splitting the volume and meeting two sets of rules. Other manufacturers will either not have the resources to supply two separate markets or won’t see the benefit. They may see a moderate drop in sales volumes with a moderate cost increase. The UK market will then have less competition. In the short term this will benefit UK manufacturers however after a short period there is a danger that due to lower competition prices will increase and quality decrease.

Modifications or completely new standards are typically driven by working groups of manufacturers with little opportunity for consumers to contribute or object. Updates to standards can take many months, often years to agree and approve. Once the standards are approved there is often a transitionary period of years for manufacturers to meet the new standards. This also allows for test houses to modify their test regimes and for UKAS to approve them for those tests.

A waiting game

We still don’t know what the negotiated deals will end up being.  We don’t know if UK manufacturers will be able to put a CE mark on products after our departure. Similarly, we aren’t sure how the British made product destined for the UK market will, in the future, be marked as meeting compliance requirements. Especially, where these requirements haven’t been determined, ratified, agreed or published.

This is a challenging time for UK manufacturers, it’s difficult to plan for the changing sands of the compliance and exporting landscape. We’ll endeavour to keep you up to date as Brexit and its impact on exporting and approving electronics is better defined.  In the meantime, we appear to have little choice but to continue to use the EU product standards. However, it must be under their associated directives (Radio Equipment Directive, EMC directive, Low Voltage Directive, Machinery Directive, Construction Products Regulation etc) as they will be required for European manufacture. With a bit of luck and a lot of common sense, the initial UK standards may even use the EU documentation as a starting point.

If you have any questions, please don’t hesitate to get in touch!