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Brexit customs plan could cost UK aerospace/defence industry £2.3 billion - trade body

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LONDON (Reuters) – Britain’s aerospace and defence industry could face extra costs of 2.3 billion pounds ($3 billion) to comply with the customs arrangement favoured by some Brexit supporters within the cabinet, according to forecasts by trade body ADS.

Britain’s future customs arrangement with the European Union is a matter for debate within Prime Minister Theresa May’s cabinet, between those who favour a clean break with Europe and those willing to accept closer cooperation with Brussels.

The customs arrangement known as “max fac” or maximum facilitation, backed by those looking for a clean break, would cost the aerospace and defence sectors 2.3 billion pounds, up from last year’s estimate of 1.5 billion pounds, said ADS.

ADS said the growth was due to a rise in the value of exports to the EU across the aerospace, defence, security and space sectors, where British companies are involved in highly integrated supply chains.

UK businesses as a whole will face a cost of up to 20 billion pounds a year to comply with the max fac customs arrangement, Britain’s most senior tax official said on Wednesday.

The other option, for those who favour closer cooperation with Brussels, is a so-called customs partnership.

ADS said that both options would cause problems for Britain’s aerospace and defence industry, which employs 380,000 people and accounts for 41 billion pounds worth of exports.

“We are concerned that implementing either of the two customs options proposed would cause substantial disruption and cost to industry and supply chains,” ADS Chief Executive Paul Everitt said in a letter to two parliamentary committees: the Committee on Exiting the European Union and the Treasury Committee.

ADS said they would prefer the government stay in a customs union with the EU – a move that would make commerce with the bloc easier but limit Britain’s ability to strike independent trade deals.

“It is ADS’s view that a customs union combined with a high level of regulatory alignment between the UK and EU is necessary to minimise new costs, maintain industrial competitiveness and protect the high-value jobs our sectors provide,” ADS said.

ADS represents some of Britain’s biggest aviation companies like engine-maker Rolls Royce <RR.L> and Airbus <AIR.PA>, the European planemaker which makes wings in the UK.

(Reporting by Sarah Young, additional reporting by Andrew MacAskill; editing by Stephen Addison)

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