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Why AEO is essential for manufacturers with non UK supply chains 21/11/2017

Juliet Wallwork, customs duties director at the EEF discusses AEOs, the Authorised Economic Operator schemes, that aim to make trade across customs borders simpler and more efficient.

As seen in the EEF Manufacturing Fact Card, the EU currently accounts for 48% of UK manufactured exports – it is and will continue to be a substantial trading market for the UK. However, as the UK prepares for Brexit, it is imperative for manufacturers to consider the potentially adverse impact that new customs border reporting requirements could have on manufacturers EU supply chains.

Under both a hard or soft Brexit, there is a strong possibility that businesses will need to submit customs declarations for the movement of goods between the UK and EU and understandably this has led to widespread concern that this could result in shipping delays.

With close ties between UK and EU manufacturing, these new requirements should be high on the boardroom agenda for UK manufacturers, particularly those with 'just in time' supply chains.

One opportunity available to manufacturers to help mitigate against this risk, is to   apply for a supply chain accreditation 'Authorised Economic Operator' (AEO) which allows companies to fast-track goods through customs border controls, reducing the risk of delays.

What is Authorised Economic Operator ‘AEO’?

AEO is a voluntary, globally recognised supply chain accreditation introduced in the EU in 2008 and is available to any EU-established business involved in imports and/or exports.

Take-up of AEO amongst UK businesses has historically been lower than in other EU Member States, because the benefits of AEO then (faster clearance at port, international supply chain quality mark) did not give UK businesses a clear financial or supply chain advantage.

However, with the introduction of new customs legislation in 2016 and Brexit, this has changed. AEO will now offer UK businesses both financial and supply chain benefits which cannot be ignored.

Implications of the Union Customs Code

The Union Customs Code (UCC) came into force on 1 May 2016 and created a number of benefits which are only available to businesses with AEO. These include:

  • Reductions in financial guarantee levels, 70% for actual customs debt and 100% for potential customs debt, resulting in cost savings

  • Faster application process for some customs reliefs and simplifications

  • Mutual recognition arrangements with third countries (such as US), resulting in potential reduced broker costs

  • Consignment fast tracking through customs borders.

Brexit impact

AEO status will become more important for UK businesses under Brexit. The UK government has estimated that UK customs border entries may increase fivefold. Ports such as Dover will bear the brunt of this leading to potential delays (at port and in clearance times), something UK business has not experienced before. It is widely anticipated that where there are clearance hold ups at port, those businesses with AEO will be given priority.

Brexit will impact the movement of goods between the UK and EU. For businesses with time sensitive or just-in-time supply chains or moving perishable goods AEO will become a business necessity. The current application process for AEO already takes around six months and this time frame is now increasing as more businesses begin to apply before March 2019.

How can businesses become AEO authorised?

Businesses wishing to become AEO authorised must apply to HM Revenue & Customs, ‘HMRC’.  The applications process requires businesses to complete a self-assessment questionnaire and provide supporting documentation covering their customs and supply chain security compliance processes, procedures and controls. As part of the application process, HMRC will audit businesses to ensure that the documented processes, procedures and controls are being applied and followed.

At BDO we have a number of customs duty specialists who are highly experienced in helping businesses to become AEO authorised.  They are able to guide businesses through the AEO application processes, offering, for example, practical advice around the scope and level of detail which businesses need to demonstrate in their customs and supply chain security compliance processes, procedures and controls.

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Process innovation can help bring more companies to the productivity frontier - EEF/Santander Survey 21/11/2017

Manufacturers’ remain at the forefront of the UK’s business innovation efforts, according to a new survey published by EEF, the manufacturers’ organisation and Santander.

The Monitor shows innovation is key to manufacturers’ success at home and overseas, and is seen as a critical part of their growth strategies. First and foremost, innovation helps manufacturers to do things better. It also helps them to enter new export markets as well as to seek new domestic markets. It’s about much more than new products and new markets. And as a result, the breadth and focus of manufacturers’ innovation activities has changed significantly in recent years.

Key findings:

-          Almost all (95%) manufacturing respondents engaged in some form of innovation in the past three years, unmoved from the 2015/16 Monitor;

-          Three-fifths of manufacturers reported introducing a new or improved product in the past three years;

-          But a balance of 37% of companies agreed that “process innovation is becoming more important than other forms of innovation”;

-          Positive outcomes from process innovation are widespread with reduced production costs (72%) and higher productivity (70%) topping the list of cited benefits;

-          Not all companies are making the most of process innovations; less than half (45%) report that process innovation involves the use of new ICT to improve product processes;

-          Industry-academia interactions on process innovation are low with only a sizable proportion of companies never involving universities (43%) or Catapult centres (90%); and

-          Propelling more companies towards the productivity frontier requires policy to help manufacturers overcome certainty, capability and cash barriers to more effective process innovation.

Confirming the dominance of industry Research & Development (R&D) spend, the survey highlights the on-going prioritisation of investment on innovation in the past three years. While the development of new and improved products remains critical in meeting customer requirements and cementing manufacturer’s position in global value chains, process innovation is becoming even more important.

A balance of 37% of companies agreed that process innovation is more important than other forms of innovation. This growing importance is being driven by the need for complementary innovation to deliver leading edge production techniques in support of new products, the need to increase the flexibility of product processes and the increasingly pressing need to improve productivity.

The research shows that there are no downsides to process innovation, but it is also clear that not all manufacturers are making the most of their efforts. Concerns that there is a chasm opening up between companies at the innovation frontier – investing on multiple fronts, including 4IR technologies – and the less-productive majority, are confirmed.

With innovation and science set to be a centrepiece of the government’s forthcoming industrial strategy white paper, it is vital that policy makers also recognise the value of process innovation to drive productivity. Support for innovators needs to be broader than help with new product development, it also needs to help manufacturers bridge the gaps to the adoption of new technologies and modern manufacturing techniques. 

Commenting, Ms Lee Hopley chief economist at EEF, said: “Manufacturers are continually having to broaden their horizons when it comes to innovation and investment priorities. It’s hugely encouraging that we see productivity-enhancing process innovations become more widespread in their adoption across manufacturing, in addition to companies retaining their focus on new and better products for customers.

“But not all companies are moving forward at the same pace, with many constrained by access to the right people and overcoming uncertainties about the returns from their innovation efforts. While our message to industry is to cast their net wider, particularly to build more collaborative partnerships, it is also clear that support for the spectrum of innovation – including modern processes – should be centre stage in the government’s forthcoming industrial strategy.”

Commenting, Paul Brooks, head of manufacturing, ‎Santander UK, said: “It is great to see the manufacturing sector leading on many forms of innovation and accounting for 70% of all R&D in the UK. This new report shows that around half of manufacturers innovate to enter overseas markets and we at Santander are ideally placed to support those international trading ambitions. Innovation is a cornerstone of many businesses future success and is something that every business should be looking to embrace. We are committed to working with manufacturers to help them increase their productivity and capitalise on new opportunities.”

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Jeremy Corbyn to speak at EEF Conference 17/11/2017

EEF, the manufacturers’ organisation, has announced that Labour leader Jeremy Corbyn will be a keynote political speaker at its National Manufacturing Conference in London on 20th February 2018.

During his presentation at the conference 'Global Britain: Change, Opportunity, Growth', Jeremy Corbyn will set out his vision for industry and the economy and will take questions about his plans for a future Labour Government.

The flagship annual event, sponsored by asset finance provider, Lombard, brings together some of Britain’s leading Government politicians, senior industrialists and manufacturing leaders.

Other high-profile speakers include Martin Wolf CBE, chief economics commentator at The Financial Times and Greg Clarke, Secretary of State for Business, Energy and Industrial Strategy.

Key themes up for debate include the smart energy revolution, coping with a post-Brexit workforce and trading with the EU. With the ever-increasing threat to business from cyber-attack, Ewan Lawson, cybersecurity expert from RUSI will chair an interactive session.

Terry Scuoler, Chief Executive of EEF, says: “With Brexit on the horizon, our conference comes at a critical time for industry, which has a key role to play in ensuring that post-Brexit Britain is a great success.

“This conference provides an important collaborative platform for industry and Government to work together and to hear what Opposition politicians are thinking. Government departments across the Brexit agenda must continue to work hand-in-hand with industry in order to tease out the best way forward as we form the post Brexit landscape.”

Ian Isaac, Lombard MD, says: “We are once again proud to be headline sponsor of EEF’s National Manufacturing Conference – bringing together Britain’s most influential manufacturing and engineering companies. We continue to recognise the importance the manufacturing sector has on the wider UK economy, and we are dedicated to supporting businesses by funding the equipment they need to innovate and grow.

“We look forward to welcoming manufacturers, industry leaders and leading politicians to the event as we come together to tackle the challenges that lay ahead and grasp the opportunities that come with those challenges.”

For more information or to register your place at the conference, visit http://www.manufacturingconference.co.uk

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Conference focuses on risks and opportunities 31/10/2017

NDI, the organisation representing Britain’s Defence, Security, Aerospace and Space industries, and a fully integrated division of EEF, the manufacturers’ organisation, is bringing together a ‘who’s who’ of speakers at its two day National Conference on 22nd and 23rd November at Alderley Park in Cheshire.

The conference will examine the risks and opportunities within the defence, security, aerospace and space sectors over the next two years. Topics to be covered will include Brexit negotiations, future developments in North American markets and the seemingly growing risk from cyber-attack which will all shape business conditions over the short to medium term.

The event will also give delegates the opportunity to hear from Harriet Baldwin, the Minister of State for Defence Procurement, as well as senior figures within the industry sectors and thought leaders from both public and private sectors. 

There will also be the opportunity for networking with peers and ‘meet the buyer’ sessions through facilitated one-on-one meetings. There will also be key breakout panels led by the MoD, Thales and Airbus.

Speakers will include:

Professor Trevor Taylor, RUSI – Brexit Defence Spending Power, Implications & Opportunities

Richard Daniel, CEO Raytheon – International Opportunity & Development

Mark Camillo, Head of Professional Indemnity and Cyber. AIG – Managing Cyber Exposure and Bending the Risk Curve

Brian Johnson, UK Business Development Director BAe Systems Maritime – Update on UK Naval Programmes, timings and opportunities

For details of how to book visit www.ndi.org.uk.

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Manufacturing investment slows as Brexit uncertainty brings reality check 24/10/2017

Investment by Britain’s manufacturers has seen a reality check in response to the continued political uncertainty, according to a major study published by EEF, the manufacturers’ organisation and Santander.

According to the EEF/Santander Annual Investment Monitor, while demand conditions should be spurring on investment just one third of companies say that Brexit has had no impact on their plans. A similar proportion are only investing to satisfy current plans and waiting for clarity on any deal before investing further, while at the other end of the spectrum 13% of companies are holding off investment altogether until there is further clarity on a Brexit deal.

Taken together this leaves the outlook for investment by manufacturers finely balanced with only a narrow majority expecting to be investing more on new equipment in the next two years. While the reticence emanating from other parts of the global economy has diminished, the survey reflects increasing Brexit-related uncertainty. 

This indicates that while manufacturers may be investing to satisfy current plans or, expand capacity, they are not investing in improving their production capacity. The survey’s spotlight on investment in automation shows that industry is making only slow progress on automating manufacturing processes, with industry being held back not just by caution but also by challenges from the cost of technology, uncertainty about returns and the capability to successfully implement change.

In response, EEF considers that boosting investment and productivity should be at the forefront in the forthcoming Budget statement.

Commenting, Lee Hopley, Chief Economist at EEF said: “Manufacturers have navigated a panoply of demand-related challenges in recent years, which have taken a toll on the sector’s appetite and ability to invest. With global demand on the up conditions should be ripe for industry to make new investments in capacity and productivity enhancing technology. But Brexit means the future outlook for investment is not clear cut.

“Political uncertainty is adding to the hurdles of cost and lack of skills in holding back spending on automation technology. The forthcoming Budget can at least start to address the latter of these challenges, starting with an ambitious industrial strategy that tackles barriers to investment head on and ensures UK manufacturers are equipped to compete for the future.” 

Commenting, Paul Brooks, head of manufacturing, Santander, said: “While the Monitor shows that investment by UK manufacturers is down on last year, it is encouraging to see that just over half of manufacturers intend to spend more over the coming two years. The Monitor shows that uncertainty surrounding the Brexit negotiations has impacted some firms’ investment decisions,  despite this, 51.5% of businesses responded that they are either increasing investment due to Brexit opportunities or that Brexit has had no impact on their investment plans.

“The Monitor clearly highlights the need for businesses to invest more in automation, with the report showing that the UK investing significantly less in machinery than our European counterparts. At Santander, we strongly encourage those firms that are holding back to focus their investment decisions on increased automation which can lead to productivity gains. By investing more in this area, UK manufacturers can improve their competitiveness. Santander has a range of support to help them do this.”

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Clean Growth Strategy: a useful framework if lacking in detail 17/10/2017

Speaking at the launch of the government’s Clean Growth Strategy, Secretary of State Greg Clark, was clear that this wasn’t just a climate plan, it was part of the UK’s forthcoming Industrial Strategy, comments Roz Bulleid, senior climate and environment policy advisor at EEF.

That will be welcome among manufacturers, most of whom see decarbonisation as bringing extra costs – through higher electricity bills for example, or complicated regulatory frameworks – rather than as a potential source of revenue.

Not surprisingly, this might not mean opportunities for all; the focus is on low-carbon transport, batteries and energy generation. However, that is still progress from a few years ago, when the perception was that the low-carbon economy simply meant renewables. There are also some measures that should support low-carbon innovation in other areas, including the recently launched Industrial Energy Efficiency Accelerator and promise to continue implementing EU energy efficiency standards for products after Brexit. (The latter is a significant announcement in its own right; one most manufacturers will welcome as it stops them having to make multiple products for multiple markets, but will anger the tabloids.)

A more supportive approach

Notable from a manufacturing perspective is a new 20% energy efficiency target for business. The details of how this will be achieved still need to be fleshed out but there’s welcome promise of support via new heat recovery and energy efficiency funds. As EEF has repeatedly pointed out, the power sector has received vastly more public funding for decarbonisation to date than industrial firms, even though energy efficiency can cut greenhouse gas emissions more cheaply.

There was also a revival of support for Carbon Capture and Storage (CCS) and we look forward to hearing more details of the government’s plans in this area. CCS is seen as vital to meeting the UK’s carbon targets at least cost, but strong government support mechanisms are needed if it is to be implemented in a way that still ensures UK firms can compete internationally. 

Remaining uncertainties

On the negative side, it is disappointing to see no development of the government position on the long-term future of the EU Emissions Trading System and regulation of the sectors it affects after Brexit. Companies in the scheme urgently need more clarity on the approach the government will be taking. There was also limited recognition of the electricity price disparities UK industries face compared to European competitors, some of which is linked to UK decarbonisation policies. Hopefully this will receive greater play in the Industrial Strategy white paper.

Manufacturers should be critical too of the metric used to measure the success of the strategy: charting the volume of emissions produced for each unit of GDP looks good on paper but rewards deindustrialisation not a move to a genuine low-carbon economy.

Is this enough?

Looking at the plan as a whole, there will be NGOs concerned that it only delivers 90% of the emission reductions required for the 2030 carbon target. At this point, and without knowing what technological changes are on the horizon, this is arguably not a bad start. At least there is a framework of policies and actions to work to, set against a timeline. The hard work of implementing that strategy starts now.

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EEF launches 4IR 'Business Ready' podcast series 03/10/2017

EEF, the manufacturers’ organisation has launched a second podcast series designed to guide manufacturers through the challenges and benefits that the fourth industrial revolution (4IR) will bring, and help them implement a practical series of continuous improvement programmes and cost saving initiatives across their business that achieve long-term success.

The series, delivered by experts from EEF’s Manufacturing Growth Team and special guest speakers, will provide key insights into five different topics which will cover the impact of the digital future and, the culture change this is likely to have across the workforce.

The topics will cover:

•  Manufacturers and the 4IR journey

•  Manufacturers and Cyber Security, guest speaker Nigel Mackie, Head of Cyber Security Business Development

•  The Workplace of the Future – Technology and digitilisation

•  The Workplace of the Future – Job security, role diversity and robotics

•  The Workplace of the Future – Upskilling and new skills

Through the podcasts companies will gain valuable advice on where to focus and practical tools and advice which they can implement as part of business strategies for the digital future. They will also cover specifics and highlight key questions which manufacturers are raising through EEF’s new Online Problem Solving Network which is linking manufacturers with their peers across the industrial community.

Commenting, EEF consultancy director, Martin Strutt, said: “4IR presents huge challenges and opportunities for manufacturers with the introduction of new technology, new skills and both organisational and cultural change. Manufacturers need to act now if they are to compete and innovate in this digital future.

“This series will provide them with practical and realistic steps they can take right across their business which will ensure they are business ready to take advantage of the opportunities this new era will bring.”

The podcast is available to listen to at: http://www.eef.org.uk/resources-and-knowledge/productivity-improvement/be-business-ready

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EEF welcomes transition avoiding cliff edge 25/09/2017

Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, reacted to The Prime Minister, Rt Hon Theresa May MP, recent speech in Florence.

Prime Minister Theresa May set out how the aim for the UK to have a two year transition period post 2019 and leaving Brexit.

“This is a welcome step forward which shows the Government is addressing business' key requirement for a smooth transition. We have been pressing for clarity and some common sense and the Prime Minister has responded to this in a positive manner," says Terry Scuoler, chief executive of EEF.

“A sensible transition period avoiding a cliff edge and two sets of change for companies and, which maintains a stability from a business perspective, is something companies will welcome. What business wants to see now as talks progress are positive negotiations towards a final deal that involve as much tariff free and frictionless trade between the UK and the EU as possible.

“We also welcome the time of the debate and a willingness to continue to support and fund joint initiatives on research and education which have had proven benefits for UK science and business.

“In the same way the Prime Minister's strong support for maintaining close security ties with our partners sends out the right signal and is welcomed by business here and in Europe.”

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EEF expands training offering across UK 18/09/2017

Manufacturers will have greater access to a range of world class training as EEF, the manufacturers’ organisation, is expanding its training venues across the UK.

EEF already provides a range of training courses and consultancy for manufacturers in 12 venues across the UK. This is now being expanded with new venues in Kent, Plymouth, Southampton, Nottingham, Leeds, Cumbria and London, and will give companies access to training in subjects ranging from health & safety to technical skills training, management, leadership and HR and employment law.

This training is aimed at companies of all sizes with the aim of helping them improve skills, compliance and productivity throughout the workforce. This can be training in hundreds of courses leading to recognised qualifications from compliance and regulatory bodies, or personally tailored consultancy to meet the individual needs of business and individuals.

Earlier this year EEF received a top accolade for its customer service and training for the fifth consecutive year.

EEF offers specific training and courses in the following areas:

  • Environmental management and sustainability
  • Lean and process improvement
  • Technical skills 
  • HR & Employment Law
  • Management & leadership
  • Personal impact, effectiveness and business skills
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Exports go from strength to strength 05/09/2017

Britain’s manufacturers are enjoying buoyant conditions on the back of export markets going from strength to strength according to a major survey published today by EEF, the manufacturers’ organisation and accountancy and business advisory firm BDO LLP.

According to the EEF/BDO Q3 Manufacturing Outlook survey manufacturers have taken the continued political upheaval and uncertainty at home in their stride, taking advantage of the upswing in the Eurozone in particular, as well as the synchronised upswing in global trade.

This boost in trade has benefitted all sectors, with the boost to confidence about individual firm performance translating into a positive picture for both recruitment and investment intentions in the near term. The latter is being aided by an improvement in profit margins.

In contrast to confidence about their company performance, however, the same cannot be said for their outlook for the UK economy where confidence indicators have dropped for the second quarter in succession in response to weak consumer spending and political uncertainty.  Moreover, inflationary pressures have not completely subsided, with recent sterling depreciation likely to provide another ripple of price increases in the coming months.

Key Points

  • Output and orders bounce back to historic highs
  • Export sales go from strength to strength
  • 60% of companies cite EU as offering most growth opportunities
  • Consistent picture across all sectors and regions
  • Positive recruitment and investment picture
  • Confidence about UK economy drifts lower
  • 2018 forecast of 1.3% for GDP and 0.5% for manufacturing

Commenting, Ms Lee Hopley, Chief Economist at EEF, said: “Manufacturers appear to have taken the recent political upheaval in their stride and are taking advantage of growing world markets to make hay while the sun shines. This period is likely to be the peak, however, and we are likely to see a more stable picture in the coming months rather than any further significant acceleration.

“There is little doubt that Brexit is likely to weigh on sentiment over the next twelve months with uncertainty over the UK’s terms of exit. As such, it is vital the Government sends a signal to industry and investors in the UK and overseas that it is doing everything in its power to get growth of the UK economy back on the agenda. This must include a bold and ambitious cross -government industrial strategy.”

Tom Lawton, Partner and Head, BDO Manufacturing, said: “Despite the economic and political uncertainties, manufacturers’ continue to be a force to be reckoned with, delivering a strong performance as well as increasing both investment and employment plans to make the most of the strengthening export opportunities available to them.

“However, manufacturers’ confidence about the UK economy has continued to fall for the second quarter running. With growing opportunities around the world, particularly the Eurozone, manufacturers’ need stability and certainty in government policy (including Brexit) to provide the right environment for them to commit to the significant capital and research investment required to support continued growth.”

According to the survey, both output and orders were in healthy territory with the output balance surging to +34% (+26% in Q2) with expectations that it will remain in this area going into the final period of the year. Orders balances have seen further gains with total orders reaching a historic high of +37% (+25% in Q2).

Whilst UK orders remained on the softer side, export orders have continued to climb, reaching a balance of +33% (+28% in Q2). Whilst this tallies with the improvement in global trade across all markets, the survey showed that EU prospects continue to stand out. Three fifths of companies reported positive demand conditions across the UK’s largest market, virtually unchanged from Q2, up from 47% a year ago and double the figure for Asia.

Looking forward EEF believes the third quarter could, however, mark a peak with forward looking expectations indicating that manufacturers are expecting more of the same rather than any further acceleration in the final period of the year.

The positive picture for industry has translated into an increase in recruitment and investment intentions. The balance of companies taking on more employees rose for the fourth consecutive quarter to +25% (+21% in Q2), reaching a three year high in the process. Similarly investment prospects have had a strong quarter with capital expenditure plans more than doubling to +15% (+7% in Q2).

Looking ahead, despite the buoyant picture the cloud on the horizon remains the UK economy. While firms are confident of their own performance, EEF’s indicator for the UK economy has slipped for the second quarter running in response to the continued political uncertainty and squeeze on consumer spending. As a result EEF continues to expect tepid GDP growth of 1.6% this year and 1.3% in 2018, with manufacturing growth of 1.0% and 0.5% respectively.

The survey covered 416 responses and was carried out between 2 and 23 August.

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