The British Chambers of Commerce has warned the UK could be sleepwalking into a legislative nightmare, which could upend the EU Reset, unless urgent action is taken.

The EU is currently pursuing a Made In Europe agenda which aims to protect its industries from unfair international competition due to subsidies and tariffs. The EU’s Anti-Coercion Instrument, its so called ‘trade bazooka’ is one aspect of this.

But among new proposals it is considering are content rules that mean up to 70% of the components in the goods it makes must be of EU origin. It is also looking at new rules on sustainability, capping foreign direct investment and procurement.

As the UK is now a third country supplier this could squeeze British firms out of supply chains, as well as increasing costs and bureaucracy.

The concern over the EU’s plans is particularly acute in the automotive sector where legislation has already been tabled to increase EU only content and subsidies for EU made vehicles.

The next step in the proposals is the introduction of the Industrial Accelerator Act, which is expected this week.

William Bain, Head of Trade Policy at the BCC, said:

“There is a continuing debate between EU members as to how far it should push its Made In Europe agenda. But if a more extreme version is enacted, it would have a chilling effect on cross-border trade and cause chaos for EU based producers reliant on UK parts and components.

“The UK government is very much alive to this danger and dialogue is on-going, but this issue is not yet on the radar of enough firms, and its seriousness cannot be underestimated.

“We would urge British companies to start speaking to their EU customers about this to make the case for continued supply chain integration and find out where they stand.

“The EU remains the UK’s biggest export market and thousands of our businesses are fully integrated into supply chains for everything from automotives and aircraft to missiles and medical equipment.

“If legislation is brought in, that demands almost three quarters of the content of EU products is from within the bloc, then British firms would inevitably be forced out. That would be very bad news for us, but it would also be equally bad news for European customers.

“The clear and obvious solution is for the UK to negotiate a full exemption across all of this new legislation with the EU. Agreeing new arrangements on food and drink and potentially greater access to defence contracts in the EU Reset needs to be accompanied by certainty on supply chains for key UK industries.”

Robert Heslop, Head of Office & Director of Government Affairs at the British Chamber of Commerce in EU & Belgium, added: 

“The Industrial Accelerator Act comes at a critical moment for the European Union as it searches for trusted partners and the international trading system creaks under immense pressure.

“There is an opportunity for the EU to show global leadership and forge stronger economic ties with trusted partners and like-minded economies, like the UK.

“International cooperation is absolutely vital to strengthen Europe’s industrial base. The Chamber’s cross-sectoral membership is made of the very companies that define a Made with Europe approach.

“They facilitate trade between the EU and UK and drive a shared objective for growth, competitiveness and security. It is vital that the European Commission considers this crucial connection in considering the Act.”

Patrick Keating, Head of Government Affairs at Honda Motor Europe, said: “We remain concerned about the strong emphasis on ‘Made in the EU’ requirements in the Industrial Accelerator Act, which risks limiting global supply chain resilience and reducing consumer choice during the transition to sustainable mobility.

“Honda rather proposes a cooperative approach under our ‘Made with Common Values’ principle, ensuring that Europe and trusted partners, such as the UK and Japan, work together to deliver sustainable mobility solutions for consumers.”