What does the Breakdown in Brexit Talks Mean for Manufacturing?
It seems like every day there’s a new headline about Brexit. Whether it’s arguments about the single market or how the British would cope without migrant workers, the negotiations are far from complete. The Brexit process is complicated and there are many areas where leaders need to come to an agreement – but what will the impact be on business and the economy?
The answer is yet to be revealed, with many experts predicting positive and negative outcomes. There are benefits and risks associated with leaving the European Union, and nobody knows how it’s going to play out. Almost a year into the negotiations, little progress has been made – so how can businesses prepare for what’s to come?
The most important factor for the economy, and what many UK jobs depend on, is the final trade deal reached with the EU. It remains one of our biggest trading partners, and if tariffs are introduced then businesses will undoubtedly have to push up prices. An unfavourable trade deal will impact profit margins for UK manufacturers – which is worrying for the industry as a whole. A so-called hard Brexit is expected to cost the UK manufacturing sector £17bn a year in lost EU export revenues.
Of course it’s not just a new trade deal with the EU we need to settle; we need to negotiate individual trade deals with all other countries in the world. This could provide more opportunities to improve our current trade arrangements with the US, Canada and other countries outside of EU markets. However it remains to be seen whether the barriers to trading in the EU could be off-set with better trade deals elsewhere.
Another topic up for discussion during Brexit is the free movement of people. As part of the EU, it was relatively easy for anybody with a European passport to come and work in the UK. Many sectors rely on a stream of migrant workers, including manufacturing where approximately 10% of the workforce are EU citizens.
If it becomes more difficult for migrants to claim the right to work in the UK, a labour shortage could be a real issue. Because immigration was such a hot topic in the Brexit debate, and cited as the main reason why the British public voted to leave, the government have to make changes in this area.
UK manufacturers need to try and estimate what tariffs and labour shortages they could be facing in the future, in order to reduce the risk to business once the UK formally separates from the EU.
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