Articles From the Team

BREXIT – an early look at its potential impact on a manufacturing client

For me the Brexit result came as a huge shock and a disappointment. It was not the result I had voted for and I remain concerned about the overall impact Brexit is going to have on the UKs place in the world economy, particularly during the two year negotiation period whilst we formally exit the EU. Voting ‘Remain’ doesn’t imply that I was pro-EU however, as the European Union is far from perfect, I simply felt that the perceived negatives were outweighed by the perceived positives - although when it comes to the EU and politics nothing is ever straight forward.

For others however (the 52%), leaving the EU has come as a welcome result, a chance for the UK to recover its independence and to release the country from the shackles of Brussels, the un-elected bureaucrats, and the ever-closer integration of EU countries – a Federal Europe. Those people also voted to limit the free movement of people coming in to the UK from the EU (but not the rest of the world as some believed), an element of Brexit which caused the most controversy and arguably, from my position as a ‘Remainer’, resulted in the ‘Leave’ vote winning the referendum.

From a business perspective, it is argued that leaving the EU will see the UK would recover its sovereign powers and be able to strike its own trade deals. Any fall in the value of the pound is said to be good for exporters, as it makes our goods more competitive, whilst striking our own trade deals, solely in the UKs interests, is expected to allow our exporters to strike out beyond the EU to trade with the wider world. Opponents of Brexit argued that leaving the EU would result in lower foreign investment, higher costs, reduced influence and problems attracting and retaining skilled labour.

I wanted to test the theory that Brexit would be good for our manufacturing clients and so I have begun to make contact with a number of BCL Legal’s clients to test the theory. Although it is very early days, and every business is different, my early research indicates that Brexit and a lower value in the pound is likely to have a more complex impact on manufacturers/exporters than low price (value of the pound) equals greater orders for UK products. Far from it, there are actually tens of other elements which will need to be considered, some positive and some negative.

In evidence of this, one of BCL Legal’s clients, a £200m turnover engineering and manufacturing company, based in the UK and with operations internationally, sent me the following when questioned about Brexit’s impact on their company:

“Our thoughts were that an exit decision would not be beneficial to the Group. Many of the technical standards to which we build our products are determined by European Committees on which the UK is currently a serious participant, and where we can exert influence. If we lose our representation, our competitors will gain, as we may often find ourselves in “catch-up” mode on product design and requirements.

We employ a number of technicians, engineers and operatives from a variety of EU countries and it will be very detrimental if we lose access to this skill base. This will apply to manufacturing, engineering and construction.

In short Brexit is likely to pose problems but right now we need a period of reflection and to see the terms upon which we negotiate our separation from the EU.”

The comments by this client are particularly interesting and they raise some good points, many of which the majority of people would not have thought of. Manufacturers operate in a competitive environment where any disadvantage could lead to loss of business. Losing or failing to attract key talent, losing power and influence regarding technical standards, and losing favourable trade agreements are clearly major concerns. Whilst a low value in the pound may drive orders we also need to consider that imports of raw materials will cost our businesses more, this will impact on a companies bottom line and consequently impact on monies it has available to reinvest, pay dividends, recruit additional staff etc.

My initial research has tended to find that companies are operating a business as usual perspective however it is already documented that an exit from the European Single Market could see companies relocate jobs, offices or manufacturing out of the UK – Visa, Vodafone, HSBC etc. are early examples. This could simply be posturing however only time will tell if Brexit proves to be a positive or a negative for the UK.

I plan to continue speaking with clients of BCL Legal to ascertain their views and I hope to update with further blogs as more information becomes available. Brexit is far too complex for any one article and as with everything; there will be winners and losers.

For more information contact Craig Wilson at BCL Legal.