Director Weekly  The EU’s proposed Industrial Accelerator Act and ‘Made in EU’ scheme will be devastating for the UK automotive sector unless the government secures preferential treatment

The Commission’s proposals aim to increase demand for European-made technologies and products by setting minimum requirements for public procurement and public support schemes. There’s an emphasis on supporting the low-carbon transition, and on reducing EU dependencies on global partners in strategic sectors – so the rules will apply to sectors such as steel, cement, aluminium, automotive, and net-zero technologies.

The draft Act represents a major step up in the EU’s efforts to boost European manufacturing and increase protections against cheap imports from competitors such as China and the US. The goal is to increase manufacturing’s share of EU GDP from 14.3% in 2024 to 20% by 2035.

Few in the EU would disagree with the aim of supporting manufacturing, yet some member states have raised concerns about the impact of raising protectionist walls. There would be implications for supply chains, competition, and prices; curtail manufacturers’ access to cheaper components from overseas suppliers and costs could quickly rise. Inward investment to the EU could also be hit.

For the UK, the critical question has been whether it would be frozen out by the rules – a real concern as proposals were being developed – or treated as a preferred partner. Fortunately, the government lobbied Brussels hard and has secured preferential treatment for the UK. It is a crucial win. Were the UK to be excluded, its firms would be cut off from major procurement projects and see highly-integrated supply chains hit hard. The automotive sector has been particularly concerned: Nissan is reported to have warned ministers that its Sunderland plant could close if the UK was frozen out.

It’s critical, therefore, that the government keeps working to ensure that the UK is not excluded as the proposals are debated and reviewed by the European Parliament and member states on its way to becoming law.

That adds to the work needed as part of the wider UK-EU reset. There’s much to do: a new report by the Foreign Affairs Committee criticises the government’s failure to set out clear strategic priorities or provide regular updates on progress, suggesting that work is being allowed to drift. While noting the improved political relationship, the Committee calls for a White Paper on the government’s strategy, a roadmap for the relationship’s future, and the creation of a Commons EU Scrutiny Committee to improve Parliamentary oversight.

The Committee’s arguments should be heeded by ministers. There are vitally important negotiations under way, including on SPS rules, energy markets, and youth mobility, so clarity about the UK’s interests is hugely important. We’re also still waiting for the anticipated dynamic alignment bill, which will create a framework for applying certain areas of EU rules in UK law – another area where clarity of intention will be key.

IoD members consistently highlight the importance of improving trading rules with the EU. The opportunities remain significant – and, as the Made in EU plans underline, the costs of failing to make progress are growing as protectionist measures reshape the global economy.

Increased strategic focus and a renewed focus on building momentum in UK-EU negotiations would be very welcome.