EU Referendum: How will a Brexit affect UK Manufacturing?
On Thursday, 23rd June there will be a referendum on whether Britain should remain a part of the European Union.
EEF research has shown that 85 per cent of UK manufacturers would vote against a Brexit, whereas just 7 per cent would vote for. This figures rises to 90 per cent amongst manufacturers who employ over 250 employees. Many believe that a Brexit could threaten the success of Britain’s manufacturing industry, which currently employs over 2.6 million people.
If Britain does leave the European Union, it could lose access to the Single Market, meaning that manufacturers could face a 10 per cent tariff on exports to the EU, the same as non-EU countries. It has been speculated that a Brexit would cost UK car manufacturers alone around £1.2 billion a year in tariffs. Upon a Brexit, Britain would have to negotiate a new trading relationship with the EU to continue to sell goods and services, without being hit by these hefty tariffs and other restrictions, which could take some time.
Some potential models for these negotiations are:
The Norwegian model:
Britain would leave the EU and join the European Economic Area. This would give Britain access to the single market, with the exception of some financial services. Britain would be free from EU rules on agriculture, fisheries, justice and home affairs
The Swiss model:
Switzerland, which is not a member of the EU, negotiates trade treaties on a sector-by-sector basis, which Britain could emulate.
The Turkish model:
Britain would enter into a customs union with the EU, allowing access to the free market in manufactured goods but not financial service.
Even with many companies complaining that burdens, such as complex regulations and the uncertain future of the euro comes with EU membership, the vast majority would vote against Britain leaving the EU. Many small and medium-sized manufacturers who supply larger companies, such as Siemens, would still have to comply with EU regulations regardless of the outcome of the referendum, or risk losing their contracts.
Car manufacturing giant Toyota has stated they are committed to building cars in Britain regardless of the outcome of the referendum. However, in contrast BMW have warned against a Brexit, with research by the Bertelsmann Foundation showing that 29 per cent of the 700 German businesses surveyed would either reduce capacities in the UK or relocate altogether in the event of a Brexit.
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