21 March 2019
Manufacturing industry roundtable explores Brexit impact
The UK Parliament voted to extend Article 50 on the 14 March 2019 and an extension was agreed by the EU just over a week later.
In the aftermath of a tumultuous few weeks in Westminster, B P Collins, a law firm which has advised the manufacturing sector for over 50 years, hosted a timely roundtable discussion with the UK’s leading manufacturers, industry experts and UK subsidiaries of EU manufacturing companies, to hear directly from senior management about the impact of Brexit and their thoughts on the sector’s future.
BREXIT: WHAT ARE MANUFACTURERS’ BIGGEST CONCERNS?
The key word of the discussion was ‘uncertainty,’ as Kaan Dundar, Finance Director, Vestel UK explained: “There are many different options as to what might happen next and planning for every single one of them is costly and time consuming. Even after all this preparation there is no guarantee that the time and money spent will have been useful.”
Chris Masters, Managing Director, Frontline Security Solutions (part of the Chubb Group) agreed: “It is a problem. Until you know what the game is and the rules of engagement, it’s very difficult to plan ahead.”
Kate Arnott, partner, McIntyre Hudson, offered a different perspective by advising that companies should prepare for a ‘no deal’: “Six months ago, our annual manufacturing survey revealed that only a third of companies had a Brexit strategy in place. But this has changed recently with more businesses asking how they should prepare. We are advising to plan for a no deal. Plan for the worst and hope for the best.”
IMPACT OF UNCERTAINTY ON BUSINESS
The table then focused on the impact of uncertainty on their business. Chris Masters, Frontline Security Solutions explained: “clients are holding off making decisions and this is really going to start stifling things.”
Meanwhile Hydac’s HR Manager, Janet Rothwell also voiced concern over retaining an EU workforce. “The main thing for me is that I’m uncertain about our EU workers’ futures in the UK and I’m keen to give them practical advice to help them stay in the country.”
Chris Masters, Frontline Security Solutions, (part of the Chubb Group) added that manufacturers were worried about their EU workers leaving if the uncertainty continues, particularly if they are skilled and are confident of finding work elsewhere in Europe.
Chris Brazier, business immigration lawyer, B P Collins added that many manufacturing clients also felt the same way and are concerned that there may be a skills shortage as a result. He advised: “Even if Article 50 is extended, we are advising all EU employees to apply for settled status, this will provide reassurance to them and their employers.”
Although it’s difficult to avoid Brexit, manufacturers have many more issues to consider. The markets, technology and customer behaviour are rapidly changing too and companies have to keep up by reviewing supply chains, customs procedures and implementing new technology. Although Brexit has certainly acted as a catalyst.
And, there have been positives. For example, one manufacturer was looking at Transitional Simplified Procedures (TSP) for customs, which was introduced by HMRC. As the name suggests, it is a simplified process for moving goods in and out of the country. It now has greater visibility of its supply chain, so operationally it is in a better place from this exercise.
Victoria Holland, partner, Corporate and Commercial, B P Collins also commented on the attitude from HMRC during this transition period: “It is hoped that there will be a general understanding from HMRC that this is a transitionary period for business and there should be some flexibility and leniency.”
The table then started to look beyond the extension of Article 50 with Suren Thiru, Head of Economics, British Chambers of Commerce saying:
“While an extension of Article 50 has been requested to avert the prospect of a messy and disorderly exit on the March 29th this opens up the possibility of seven different scenarios, from one extreme of ‘no deal’ to another of no Brexit at all, with a general election in between, leaving firms with no real clarity on the future.”
Around the table, other fears included the recession in Italy, forecasted recessions in Germany, US and China, recruitment difficulties, the low sterling contributing to the high cost of raw materials, supply chain uncertainties and import tariffs adding to their woes.
But there is still confidence amongst manufacturers, as McIntyre Hudson’s survey found that despite uncertainty surrounding Brexit, manufacturers are still optimistic, with 70% of respondents predicting growth for their business in the next year. This belief was reflected around the table.
Chair Paul Britton, TVCC concluded the discussion by asking participants what they would like to see in the future.
Darren Wait, MD, Hydac added: “The UK has had various challenges over the years and Brexit is one of those. The demise of coalmining and shipbuilding were considered to be the end of the world at the time. But as a country we will keep on fighting [as we always have done].”
Kaan Dundar, Vestel UK still believed there will be a good relationship with the EU: “There will be a last minute rabbit pulled out of a hat to make the relationship work. The UK and EU have such a long history of working together on cooperating on security, trading goods, fighting against common threats such as terrorism, so it’s in the interests of both the UK and EU to find a solution.”
Paul Britton, Chief Executive, TVCC brought the discussion to a close by saying that he had a huge amount of faith in businesses to drive the manufacturing industry forward:
“Where there is a market opportunity, businesses work together to find a solution. There are international links between chambers, manufacturing associations and industries and although these relationships don’t make the headlines, this is what brings positive results, new contracts and more jobs. We just need to keep the conversation going.”