UK aerospace and defence trade association ADS is pushing for the UK to remain an EU member state during a post-Brexit transitional period, until the country's future trading relationship with the bloc has been determined.
Speaking before the UK parliament's Business, Energy and Industrial Strategy Select Committee, which is looking into the impact of Brexit on the country's aerospace sector, ADS chief executive Paul Everitt said today that member companies wanted the current "status quo" to be maintained throughout any transitional period following the UK's scheduled departure from the EU in March 2019.
"For us, status quo means retaining our EU membership during that period," says Everitt. "That's important for our sector because much of our regulatory framework is shaped by our membership of the EU."
He says: "The reason why we think it is the best deal to stay an EU member state during the transition is because we have a whole series of bilateral agreements that would have to be negotiated and in place at the moment that we cease to be an EU member state."
As it currently stands, he notes, "that would be at the end of March 2019".
Everitt said that UK government proposals to implement a transitional period on "current terms" were "reassuring". But he urged policymakers to have "some of kind of formal recognition" that there will be a transitional period. Such commitment should "ideally" be made by year-end, he says – adding: "certainly as early as possible in 2018".
Leaving the EU without a deal would be the "worst possible outcome from an industry perspective" and lead to a "chaotic" situation, Everitt said.
Despite the demand for a transitional phase, he called on the government to create clarity rather than having an indefinite period of gradual or prolonged change: "We are very keen there is only one step from current conditions to the future ones and having a clear period for us to implement that [change]."
Asked whether two years would be enough, he says a 24-month transition would be a "good start – certainly better than none". However, he added: "Whether that is sufficient will depend on what a final deal looks like".
Airbus UK senior vice-president Katherine Bennett – who also spoke at the hearing, along with the UK Royal Aeronautical Society's president-elect Simon Henley – said that "some firm decisions" were needed "as soon as possible".
She said that "we are fortunate" that no large investment decisions regarding potential new aircraft developments are on the "near-term" agenda. But she cautioned that "soon" there may be a need to make plans for future programmes, adding that "uncertainty breeds uncertainty".
In the space sector, conditions seem to have started to deteriorate for UK suppliers since the Brexit vote. Henley says several UK companies have reported being excluded from bidding processes for Europe's Galileo satellite navigation programme.
Henley acknowledges that the UK's membership of the European Space Agency (ESA) is not part of the Brexit talks as it is "not an EU body". But he notes that many ESA projects are EU-funded – including Galileo - where there is a requirement for suppliers to be in a member state.
He says: "We are already seeing that contracts are turned away from UK industry because of the uncertainty."
Everitt says that UK suppliers, which work on certain space projects, including Galileo, have been required to specify where their supply chain will be located after March 2019.
The UK's space industry is Europe's largest and that "UK businesses have done particularly well from those space programmes", Everitt says. He notes the UK space industry employs around 40,000 people with an annual turnover of "[£]14 billion" ($18.5 billion).