BREAKING: What Does Brexit Mean for UK Manufacturing?
Ian Wright posted on June 24, 2016 |
Uncertainty is the worst fallout from the United Kingdom’s decision to leave the European Union.

I don’t know about you, but I spent an embarrassing amount of time last night eating fish and chips and watching coverage of the United Kingdom’s referendum to leave the European Union.

When I woke up this morning, the first thing I did (if you don’t count hitting the snooze button) was check the final results. I was shocked, to say the least. With 51.9 percent of UK voters in favor of leaving, this could be the beginning of the end for the European Union.

But before we get carried away, let’s consider what this actually means for UK manufacturing.

Brexit’s Predicted Impact

In a roundtable discussion of Brexit’s potential impact on UK manufacturing, the Institute of Chartered Accountants in England and Wales (ICAEW) raised some serious concerns.

“International payments and currency risk are sure to increase in this separated scenario,” wrote ICAEW member Michael Freedman of FXcompared Intelligence. These issues are particularly troublesome for UK SMEs, which lack the financial resources of their larger competitors.

But according to the ICAEW, even larger manufacturers—including Nestlé, Airbus UK and Nissan—stated prior to the referendum that a vote to leave would be cause to reconsider their UK operations. It should be noted that Airbus UK operates the UK’s largest manufacturing facility by workforce size.

Aerial view of Airbus’ A350 XWB wing factory, Broughton, Wales-UK. (Image courtesy of Airbus UK.)
Aerial view of Airbus’ A350 XWB wing factory, Broughton, Wales-UK. (Image courtesy of Airbus UK.)
This morning, Airbus UK president, Paul Kahn, told Sky News, “What we will obviously have to reconsider—along with everyone else—are future investments, and I can’t predict what will happen to those, but we certainly will be reviewing those investments in the UK.”

Industry Leaders Comment on Brexit

Ironically, although the referendum is over, uncertainty remains the biggest problem with Brexit. Although it’s likely that the UK will maintain some form of free trade agreement with the EU, the exact details of such an arrangement are unclear.

Terry Scuoler, chief executive of EEF, the manufacturer’s organization, wrote in a statement:

“In the complex task of unpicking the UK from EU regulation and legislation, the Government must tread carefully, maintaining a trading relationship with the single market, and not becoming bogged down to the detriment of making long-awaited and much-needed decisions on projects vital to our future economic prosperity. We must also ensure that the skilled workers we need are still encouraged and enabled to live and work in the UK.”

Scuoler added that the following priorities should be emphasized in the upcoming negotiations between the UK and EU:

  • Maintain tariff free access to the EU market for goods and services
  • Ensure regulatory stability
  • Continue to address the UK skills gap
  • Give further focus to an integrated domestic policy to support investment, competitiveness and export performance

Mike Cherry, national chairman of the UK’s Federation of Small Businesses, said, “We need to be making sure that we have economic certainty and stability restored as quickly as we can whilst the politicians get on with their deliberations. For many small businesses, access to the single market and movement of people across borders are key issues.”

In an open letter, Albert Ellis, CEO of the recruitment consultancy Harvey Nash wrote:

“I urgently call on the Conservative Party, the Government and the various vote leave movements to consider carefully the impact the vote has had on the UK and Europe with the potential impact to jobs and livelihoods. We need humility and a sober mind to begin to collaborate with our counterparts in Europe and negotiate a settlement in Britain and Europe's interest. We must remain a highly attractive country to attract skilled talent internationally. And we must keep those talent and trading channels free and open.”

Marjin Dekkers, president of the German chemical industry association VCI, stated that:

“The German chemical industry has always been committed to the political and economic unity of the European Union. For this reason, I very much deplore that the British voters decided yesterday to leave the EU. Especially now, at a time of timid economy recovery in Europe, their leaving the European Union is a negative signal for the further economic development.”

“Less economic growth in the EU Member States and weaker export business will be the consequences. But the political damage weighs just as heavily. After the differences about the refugee policy, the referendum in Great Britain is the second setback this year for the historic project of European unification. We all need a Europe which is politicially unified and economically strong.”

Brexit and the Perils of Uncertainty

As negotiations within the UK and between the country and its increasingly estranged neighbors continue, speculations about the consequences for UK in general and its manufacturing industry in particular will no doubt continue as well. Speculation is inevitable, but it’s also part of the problem.

A clear thread running through the statements made by industry leaders is the desire for stability, a desire that will only be satisfied when the UK’s new economic position is made clear. That takes time, but UK manufacturing will have to press on regardless. The UK itself remains a highly desirable market for many manufacturers, including giants like Nestlé, Airbus UK and Nissan.

Manufacturers would be crazy to leave the UK over Brexit, but then again, many people said the UK would be crazy to leave the EU.

How do you think Brexit will affect manufacturing in the UK and abroad? Comment below.

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