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Blog // 25/10/2017

The impact of Brexit on the manufacturing sector

Understanding the impact of Brexit on the manufacturing sector

The triggering of Article 50 on 29 March 2017 set the clock running, giving the UK two years to leave the EU. It started with a reasonably clear game plan, the ‘Great Repeal Bill’ was announced, whereby EU laws to be made UK law, giving us time to then filter through those laws we wished to keep and those we wanted to change. We also agreed with the EU the order of how negotiations would take place.

Caroline Milton - Menzies Accountant

This momentum has not been maintained and we are seemingly stuck at stage one of the negotiations, still yet to complete the first task of agreeing a financial settlement with the EU.

This apparent stalemate is starting to have a significant impact on the manufacturing sector, both in the UK and across the EU, with delays in businesses making decisions, stalled investment and the devaluation of the pound.


A core market

What will EU UK trade agreements look like?

Of the total goods the UK export, 44% go to the EU and whilst this is not a majority, it is a core market for the manufacturing sector. In addition, we are the 4th largest importer from the EU. It is therefore imperative for the economic prospects of the UK and the EU that these trading lines are kept open, with no trade barriers. Whilst leaving the EU may enable us to negotiate trade deals with other countries, we must not lose sight of the importance of this core market.

Increased competitiveness

Business negotiationsIf handled well, the exit from the EU is likely to increase the prosperity of the UK. Longer term, there is the potential to increase our global competitiveness – it is far easier to negotiate one government to another, rather than involving 28 other countries in negotiations, each with their own agenda. We will also be able to have greater access to work with Commonwealth countries – such as India and Pakistan, who are growth nations. This would result in us being able to import at more competitive prices, keeping inflation low.

Government support

The manufacturing sector also needs clearer support from the UK Government that it will support the EU nationals working in this country. 7% of UK labour market (2.2m) are EU nationals and this is even higher in the manufacturing sector, where EU workers make up 11% of the sector. If certainty isn’t granted over these hard-working and often overqualified workers, this will lead to significant labour shortages, with potentially devastating consequences for the UK manufacturing sector.

With a structured transition, providing protection to the current EU workforce in the UK, there is the ability for the UK to increase its global competitiveness by having a rational and planned approach to foreign workers. By having access to a wider recruitment pool, selective hires can be made that better fit the skills required.


What next?

The UK ultimately has political stability with a strong legal system. And, with a history of being able to innovate and trade internationally, in the longer term the UK continues to be a safe, competitive, sophisticated place to do business. It would be good to see some assertive developments in the Brexit negotiations in order to stabilise the current position for UK manufacturers and give that clear message to the world that we are indeed the place to do business.

For more information on the above or to talk through how Brexit may impact your manufacturing business, contact Manufacturing Partner Caroline Milton by phone on 01372 366173 or via email at CMilton@menzies.co.uk.

Find out more about Menzies Manufacturing Sector advisory services.

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