Brexit’s impact on manufacturing
Almost a year after the Brexit referendum, much of British industry is still trying to come to terms about how our departure from the EU could affect their businesses. For most, it’s a gloomy picture.
But one of the few bright spots has been in manufacturing. By causing the value of the pound to tumble, Brexit has made British exports more competitive.
In the run-up to the referendum, this was one of the arguments cited in favour of leaving the EU. Since the vote, this prediction has, at least in part, come true. The dramatic fall in sterling from June 2016 gave manufacturing a boost, helping British manufacturers to records their fastest annual growth for three years during the final quarter of 2016.
On the other hand, it looks like this growth has already begun to slow down. The Purchasing Managers’ Index (PMI) has shown declining growth in the first three
months of 2017.
The reality is much more complicated. Manufacturing accounts for roughly 45% of British exports. Not only is much of this export trade directly with the EU, but there’s also the supplier chains to consider. Many UK manufacturing firms are tightly interwoven with Europe-based suppliers. Brexit threatens to disrupt these relationships.
Ultimately, Brexit could yet make British manufacturing more competitive. A reduction in red tape combined with a low pound could make our manufacturing exports
more competitive.
Much depends on whether the government will negotiate Britain’s continued membership with the common market. This would enable manufacturers continued trade with the EU member states without tariffs. According to the EEF, ‘even a small percentage tariff is likely to have significant cost implications’.
However, despite the tough talk which has defined the outset of the negotiation, there is still a strong likelihood that the UK will remain in the common market – meaning that manufacturers could benefit from more competitive exports and unalloyed access to the single market.
So with any luck, manufacturing will remain the bright spot of Britain’s Brexit.
