Writing a post about Brexit and the future of the UK manufacturing industry has the potential to create controversy. Don’t worry though, this post is void of political opinion. Instead we want to contemplate the facts as we know them right now. The process of Brexit looks set to be long and arduous and we are not clear what the divorce settlement will look like by the time the UK actually leaves but, in the meantime, here at Nexus IE, we want to make sure we are informed so we can make the best preparations possible.

So in this post let’s take an overview, with the information we have available, how will the UK manufacturing industry be affected by Brexit and what can we all do as UK businesses to prepare?

The Past, The Present and the Future
As part of the EU Britain trades with their partners more than anyone else, looking back to 2015, the year of the referendum, 44% of the goods we manufacture were exported to other countries in the EU with a value of £223.3 billion. Of course trade goes both ways and 53% of the imports in the same year came from the EU into the UK with a value of £291.1 billion.

The lack of tariffs and quotas has made this high level of trade feasible and profitable. We must expect this to change and additional charges added to the cost of exports and imports with the EU.

There is also the potential border controls to be considered, anyone who worked in manufacturing pre EU will remember the sluggish process in which goods used to be shipped in and out of the UK, it completely slowed up the manufacturing industry particularly when companies were waiting upon parts to complete a job.

Currently some businesses wait in limbo; holding back on their long-term more aspirational plans because they want to wait until they know the market they will be working within. In some cases investment has stalled completely and banks are more reluctant to lend.

Of course it isn’t all doom, gloom and scare mongering; there have been some short term gains. After the referendum the pound dropped, this contributed to the recent growth in the UK manufacturing industry which all sides agree is very welcome.

Supply Chain Analysis   
While we all await the outcome, businesses can still be proactive; one of the first things to do is track the line of manufacturing and distribution routes currently in use and look at alternatives. There will be other trade opportunities open and understanding these is an important part of the pre-emptive analysis process.

When the costs of trades, custom, import and export VAT are announced, it is easier to then calculate the additional costs and make adjustments according to the best overall profitability (taking into account saving time where possible on border control) Be aware of any contracts, or obligations that you have with current suppliers that might affect your flexibility to move business and be wary of making new long term arrangements with any business in the EU.

Some businesses might also want to consider stocking up on resources that are imported from the EU to prepare for additional costs in advance.

Free Movement of People in Manufacturing
The free movement of people has been a major talking point for the media and politicians but how will the withdrawal of it affect manufacturing in the UK?

It is important to acknowledge the large amount of EU migrants that work in the industry and the possibility still remains that many will either leave or be obligated to return to the EU once we are out. This could potentially create a short term lack of labour within the supply chain.

Just like with the supply chain analyses, it is advisable to complete an audit of who is currently working within the business and where on the supply chain. This will help you to identify where the possible shortfalls will be if this does occurs and you can set up contingency plans for this eventuality.

Consider also the possibility of a rise in labour costs post Brexit which could also mean a workforce with more UK workers whom expect a higher wage. Outsourcing might become a feasible option for some businesses wishing to keep costs down long term.

This is an anxious time for businesses but also for employees. Be aware of this and communicate honestly with those who work with you, giving them space to communicate too. The effect of increased stress within your staff can be detrimental to the tasks they are performing right now. To keep productivity high and your workforce engaged, work towards creating a cohesive and positive environment as much as possible in the circumstances.

Prepare for the Unknown
The truth is as we go into 2018, we still have very little knowledge about what Brexit will actually mean to UK manufacturers but this is no excuse not to prepare ourselves. Here at Nexus IE we provide an all-inclusive manufacturing service for small and medium sized businesses and endeavour to stay informed and prepared.

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