Manufacturing beyond Brexit, Covid-19 and the War in Ukraine

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Sectors like automotive and aerospace have taken a series of hits from the impacts of Covid-19 (supply chain disruption, cancelled orders, chip shortages, labour shortages etc). These have come on top of the impacts of Brexit on manufacturing supply chains for example through extra costs in terms of complying with customs and rules of origin, in stockpiling goods, in shifting suppliers and so on. And the war in Ukraine has added to industry stress by increasing energy prices and disrupting the supply of some components yet further (such as for the wiring harnesses used in cars or the neon gas used to regulate the lasers etching chips).Such impacts on manufacturing have had a profound regional impact (at the time of writing London's GDP is 1% higher than it was pre-Covid. The West Midlands' GDP is 10% lower). That makes 'levelling up' even tougher.In better understanding these potential impacts, the Fellowship will look at a number of linked issues and their policy implications.1 What are the ongoing impacts of Brexit, Covid-19 and the war in Ukraine on manufacturing? For example, a key point we found in earlier research is that small firms simply really struggle with post-Brexit customs and Rules of Origin paperwork and in some cases have either stopped bothering exporting or stockpile at hubs in say the Netherlands, adding to costs;2 What opportunities exist around 'reshoring' manufacturing and what barriers could prevent this, in the context of Brexit, Covid-19 and the war in Ukraine? Could this help bring back some manufacturing jobs to UK regions?;3 Given that the EU is likely to bring in a 'carbon border adjustment tax' how could this impact on UK and EU manufacturing and how firms might respond?;4 Manufacturing is undergoing a 'twin transition' in terms of the need to reach Net Zero and embrace a mix of 'Industry 4.0' technologies like AI and automation. What could a 'just transition' look like specifically in the auto industry given the ongoing shift to electric vehicles (EVs)? Here the Brexit dimension is especially relevant given the Trade & Cooperation Agreement's requirements for batteries in EVs to be made in the UK or EU after 2026 for electric cars exported between the two to avoid tariffs. Is the UK doing enough to build an electric vehicle supply chain?5 What does this mean for government policy across these four areas and related areas (eg skills needs, regional level industrial policy) especially as the government, And given that the government has largely scrapped its industrial strategy, (how) can the UK 'grow back better'?.