The government has been asked to think of the aviation industry in its Brexit negotiations to shield the country from hits to trade and investment.
The Independent Transport Commission think-tank – a leading research charity – has publicized a report claiming that a lack of support for the aviation sector can result in trade damages once the UK departs the European Union in March 2019.
Former Bank of England economist Rebecca Driver wrote the research. It pointed out the “huge economic value” of the aviation industry and added that Brexit would have a “significant impact on the regulatory framework governing trade in aviation” making it all the more urgent that the UK keeps its global aviation ties.
Formulating updated aviation agreements with the 28-nation bloc is considered crucial especially since there aren’t any historic regulations to fall back if a deal is not struck in time.
A lot of industries could revert to World Trade Organization rules but Air Service Agreements, which allow flights across borders, are agreed upon in a bilateral basis between countries. This means there is no fundamental framework to fall back on.
“In order to preserve the UK’s air connectivity, the UK will need to ensure that there is a timely renegotiation of a significant number of aviation treaties, including with third countries such as the US, as well as with the EU,” the report said.
The UK’s aviation manufacturing sector was also identified to be an area of concern due to its dependence on factories all over the world. In 2016, the trade surplus in aircraft and aircraft parts in the UK was the largest of any of the country’s goods sectors, clearly indicating how significant the industry is to UK.
“The aviation manufacturing sector is part of significant global supply chains, with aircraft being assembled from parts from many different countries,” the report stated.
“This means that the competitiveness of the UK sector will depend on minimizing regulatory barriers post-Brexit.”
Air passenger duty, the tax often lamented by the industry for its high rate as opposed to other countries, was not spared from criticism by the report.
“If the UK is going to achieve its vision of becoming a truly global player post-Brexit, having a tax that penalizes travel to far-flung locations is likely to be counter-productive,” it said.
Cutting or even removing the tax seems dubious, especially with the moves made by Philip Hammond the Chancellor, in his Budget to raise the rate for those flying business class or with private jets.