Brexit and UK Manufacturing

The UK’s decision to leave the European Union has caused a lot of uncertainty across the business world, and until we eventually leave the EU in March 2019, it’s likely to stay that way. While nobody can know for sure how things will unfold, we do know that our departure will not only present challenges to the manufacturing industry as a whole, but also to the UK job market.

Despite an impressive £133billion gained from UK exported goods back in 2015, a failure to negotiate a new trade agreement for Brexit could wind up costing us £4.5billion a year in customs. To make matters worse, there’s also a chance that the UK could lose our tariff-free access to the single market.

The automotive industry has one of the steepest uphill struggles ahead as Ford, Vauxhall and Honda call for standstill agreement on trading and customs arrangements. In fact, SMMT figures estimate that a WTO tariff would drive the duty costs of Ford vehicles by £1,500 per car – a cost that would have a devastating effect on business.

Having our tariff-free access revoked would mean a reduction in foreign investment, which is bad news for all industries. While plans for expansions may be hindered for the moment, companies will still need to fill vacancies regardless what with 21% of SME employees being non-UK nationals being faced with applying for residency, and potentially be declined. Competitive markets like the pharmaceutical, automotive and aerospace industries could be hit the hardest by this, if manufacturing sites are moved abroad to combat a skill shortage in the UK our economy will be shaken up in a big way.

If skilled employees can’t stay put, businesses will follow them to the EU instead. British multi-national banking services company, Standard Chartered, are among the first to announce plans to turn one of their Frankfurt offices into a subsidiary. More and more international companies opt to set up locally-staffed branches in the European Union to protect their access to its market.

Brexit has undoubtedly created some interesting challenges for business, but we’ve been presented with distinct opportunities too. While some are being proactive in setting up shop in the EU, manufacturing businesses are choosing to stay put to take advantage of the cheaper exports that usually follow monetary devaluation – something the UK has already experienced as a result of Brexit. With this in mind, the UK should naturally become a more attractive place to invest for businesses.

Furthermore, the UK could make its own trade agreements without having to comply with EU regulations – which would allow UK service industries to benefit from smoother access to other marketplaces like China.

British business has proven to be pragmatic and adaptable over the years, and there are pros and cons to Brexit for the manufacturing industry. Arguably, our biggest challenge is the uncertainty we’re faced with between now and March 2019. Once businesses know what to expect, they’ll be able to plan one way or the other and bounce back to their former glory.

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Jon Horrocks

16th January

Industry Insight