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What does Brexit mean for the manufacturing industry?

24 June 2016

Britain has officially voted to leave the EU but what does this mean for the manufacturing industry and what comes next?

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Stephen Cooper, head of Industrial Manufacturing at KPMG UK comments on the implications of the EU referendum results. He said “the possibility that many manufacturers feared has come true. So what next for manufacturing businesses in dealing with the manifold implications of the exit vote? Just picking up on three areas: Given the significance of trade with Europe and trade agreements negotiated through the EU, there are significant implications for the supply chain, such as the application of tariffs. Ensuring a full understanding of the supply chain past Tier 1 suppliers and beyond is vital to assess potential actions required. Our recent report on the sector revealed that just 13 percent of global respondents have “complete” visibility past their Tier 1 suppliers and into their Tier 2 so this may not be as straightforward as some might hope.

“On the jobs front, there are very real implications to the access to engineering talent. Manufacturers will need to consider their strategy. Firstly in retaining their non-UK workforce, secondly in attracting non-UK based expertise and thirdly, more long term and one for the government to support, in developing talent on a much greater scale than they do currently.

“Investment decisions, both FDI and of UK origin, whether put on hold waiting for this vote or in the ‘normal’ course of business, will need to be reappraised. Whether manufacturers will choose to locate or develop their operations in the UK, with the possibility of tariffs in place, remains to be seen and will likely be dependent on the upcoming negotiations with Europe. Once again Government action will be important to help ensure we remain an attractive location to invest both in manufacturing and other key contributors such as science and technology.

“We should not lose sight of the fact that this result can also lead to opportunities for manufacturers; a drop in the value of sterling could make the UK a magnet for trade, and the need to reshape trade policy may result in quicker decision making, and reduced red tape.

“Of course we are only day one after the vote and the full implications will only become clearer with the passage of time – a considered approach to the emerging position is required rather any ‘knee jerk reaction’. Organisations will need to consider the tactical, short terms implications, particularly relating to market volatility and the impact on trading. However, the importance of maintaining a focus on the longer-term planning whilst in the midst of a tactical response is paramount.”

Unbiased information is available on the KPMG EU Referendum web portal here: www.kpmg.com/uk/euref 

Commenting on the referendum decision, Terry Scuoler, CEO of EEF, the manufacturers’ organisation, says “while it is not the result many businesses wanted, it is the democratic will of our country. The Government must now move very quickly to stabilise the economy, reassure the markets and shore-up business confidence. The process of leaving the Union will take some time, and the Government should not rush to initiate Article 50 and the formal exit process, while there is so much uncertainty. Ministers must think carefully about our negotiating position while setting out a clear roadmap for establishing a new deal with the EU which remains our biggest market and trading partner.

“We need a clear vision for a new relationship between the UK and the EU, but we must also avoid throwing the baby out with the bath water. 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.”

He added that manufacturers have a series of priorities for any forthcoming negotiation, including:

• Maintaining tariff free access to the EU market for goods and services
• Ensuring regulatory stability
• Continue to address the UK skills gap
• Further focus on an integrated domestic policy to support investment, competitiveness and export performance

Read EEF's new report: Manufacturing our Future: What next for Britain and the EU?

Exiting the EU is a risk to UK engineering, says leading institution

Following the outcome of the EU referendum to leave the EU, the Institution of Engineering and Technology (IET) is calling for an urgent discussion to mitigate the impacts on the engineering sector – which is vital to the UK’s economy.

The IET had published a statement of concern that a vote to leave the EU could result in a number of negative impacts on UK engineering, including exacerbating the UK’s engineering and technology skills shortage by making it more difficult for companies to recruit engineers from other EU countries.

Other issues identified included changes to access to global markets and companies, a decline in funding for engineering and science research, and a weakening of the UK’s influence on global engineering standards.

Naomi Climer, IET President, said: “We thought it hugely important that the role of UK engineering was considered as part of the EU debate.

“It was for that reason that we looked carefully at the issues affecting engineering, including the skills shortage, the global markets that engineering is a part of, research funding and global standards.

“We concluded that, at a time when we have a huge shortage of engineers, limiting the number of professional engineers that could come and contribute to our economy would affect the industry and the nation’s financial wellbeing.

“We were very careful to consider the options as they related to UK engineering but the result of the referendum is clear and we are calling for an urgent discussion so that any negative impacts can be mitigated for the benefit of UK engineering and our country’s economy.”



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