Beating Brexit for manufacturing success

More than 60 delegates attended Santander Corporate & Commercial’s inaugural Manufacturing Industry Day in Staffordshire. Representatives from Britain’s leading manufacturers, small and large were joined by expert speakers where they shared their insights on how to deal with the challenges of Brexit.

manufacturing

There is no sugaring the pill: the UK’s departure from the European Union is a major headache for British manufacturers. But while the EU includes seven of the ten biggest global export markets for UK manufacturers, Brexit does not have to be disastrous.

Trade between the UK and the EU will not come to an end. Other markets are important too – the US is the biggest single buyer of all of British manufacturing exports. And manufacturers that plan for Brexit problems while also exploring new opportunities can prosper in the years ahead.

Brexit headaches

In the short term, there’s no doubt Brexit is causing manufacturers problems. Lee Hopley, chief economist at EEF, the manufacturers’ organisation, told delegates at Santander’s Manufacturing Industry Day that the difficulties had increased over the past year, with so little certainty about the future relationship between the UK and the EU – or clarity over there will be a deal agreed on the terms of the UK’s exit. “We are seeing more companies holding off investment, both in big-ticket capital programmes and in research and development,” she said. “That’s a problem, because our competitors in the G7 are not putting investment on ice.”

The key, therefore, is to try to seize the initiative. “We still don’t know exactly what’s going to happen, but we have to take a positive view and start planning for the opportunities,” argued Bernard Molloy, Global Industrial Logistics Director for Unipart Logistics. “It is good management and strong leadership that will get us through.”

The first challenge is to assess the risks that Brexit poses and to put contingency plans in place for worst-case scenarios. Stephen Adams, a senior director of Global Counsel, said: “If we don’t have a deal by the time the UK leaves the EU on 29 March 2019, the plan for a transition period lasting until the end of 2020 will not take effect, so businesses need to be aware of that possibility.” He urged manufacturers to consider five issues:

  • Tariffs – in the absence of a new framework between them, the UK and the EU will be obliged to begin charging their standard external tariffs on goods moving between the two markets; manufacturers will need to consider how this will affect their input costs as well as their export prices.
  • Customs – there will be new arrangements for the movement of goods across borders between the UK and the EU, with greater friction; manufacturers will need to reconsider their processes accordingly.
  • Rules of origin – in a no deal scenario these will not apply, but if the EU and the UK agree a new preferential framework, goods will have to meet strict “rules of origin” to benefit; manufacturers will need to check where this applies, including within their supply chains.
  • Product conformity standards – certain products can only be sold in the UK and the EU if they confirm to certain standards; without this conformity sales will not be legal, so manufacturers will need to consider whether they are affected.
  • Migration rules: the changing rules on migration will affect manufacturers that employ overseas workers; firms need to audit the make-up of their workforce now to be ready for the final changes that are agreed.

Focusing on opportunity

With better understanding of the impact of these issues and plans in place to mitigate problems, UK manufacturers can start to focus on the opportunities of international trade. Terry Scuoler, chairman of the Institute of Exports, urged delegates to think in global terms, “There is no binary choice between selling in the EU and selling to the rest of the world – you can do both,” he said. “Proximity is often an advantage with exporting and Europe will remain an important market, but we can also increase our trade with the rest of the world, where the practical barriers to exporting are coming down with the advance of technology and improving support.”

Indeed, manufacturers seeking support on breaking into new markets will find plenty of help is available, from partners ranging from the UK’s Department for International Trade to their banks. “We’re already seeing fast-growing manufacturers exporting to both the US and the EU, but now we need to see more of them pursue their global ambitions,” said Irene Graham, chief executive of the Scale-Up Institute.

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