How manufacturing businesses can prepare for Brexit
PUBLISHED: 16:53 02 January 2019
With a deal on the table, industry is still holding its breath. Stephen Tulip, Membership Development Manager for the EEF in the south west, explains how businesses can prepare
’ll set out my stall early with this article. I’m not going to talk about whether the decision to leave the EU was the right one, I won’t mention second referendums and I’ll steer well clear of party politics.
What I will cover is the impact of uncertainty, areas of risk that businesses should be aware of, and what manufacturing businesses could (and should) be doing right now to plan for life after the EU.
Where we are
What we know for certain (at least at the time of writing) is that the UK will leave the EU at 11pm on March 29, 2019. This date is set in primary legislation and is therefore extremely unlikely to move. The UK will also leave the Customs Union and Single Market and has ruled out free movement, substantial budgetary payments and the jurisdiction of the European Court of Justice.
The UK also wants the freedom to negotiate its own international trade deals. So the UK needs to negotiate a new free trade deal with the EU - after we leave. Businesses have taken the best part of four decades to get to where we are today with some of the most integrated supply chains anywhere in the world.
It’s why EEF supports an extended transition period, to ensure an agreement with zero tariffs, no hard borders and no complex customs arrangements.
Real world impact
In recent weeks the Barden Corporation announced the closure of its Plymouth site, with the parent company stating that “The uncertainty surrounding Brexit was one factor amongst others in the analysis of the UK market.” OEMs like Honda, Jaguar Land Rover and BMW have released statements about the risks of a no-deal Brexit.
Manufacturers I speak with report that investment is being delayed or withheld as a direct result of Brexit uncertainty. Furthermore, businesses are experiencing pressure from their supply chain and customer base to absorb any cost increases and to mitigate any time delays.
There are benefits too, as some businesses are seeing increases in orders as OEMs look to localise their supply chain, or their product has become more affordable because of a weaker pound. The key is to understand exactly how your business is affected so that you can sieze opportunities and plan for risks.
The businesses I talk to fall into two camps. Either they are planning and preparing for the post-Brexit economy, or they are waiting until the outcome is certain. I encourage manufacturers to examine what tariffs will apply to them and how this may change post Brexit.
Even if you operate in a no-tariff sector like defence, you will still need to assess and record the status of your products and materials so you can confirm your no-tariff status and deal with the complexities of rules of origin.
If you are a business whose material or component costs will go up, then you need to start planning for how to mitigate this risk. The EEF has a full suite of tools on our website to help.
Movement of people
A posted worker is a UK worker that works in the EU for a short period of time. Attending a one day meeting in Berlin? You’re a posted worker. There are huge numbers of these types of workers moving between the UK and EU each year. Under current EU legislation these workers should be informing their destination country in the EU of their intent to visit and carry a document to show that they pay social security in the UK and therefore don’t have to in the EU. Once we’re out of the EU, whatever comes next will take longer and be more expensive.
How EEF is supporting you
EEF has been influencing Government at the highest level with our CEO, Stephen Phipson, meeting regularly with the Trade Minister, Business Secretary, attending the Brexit Council and sitting on the Prime Minister’s new Industrial Council, focusing on the post-Brexit economy.
How businesses can prepare
Be aware of your exposure to risk. Do you employ EU nationals? Look into the Government’s settled status system to reassure them.
Import or export to the EU? Check what tariffs apply. If you have customers who demand very short lead times, investigate how delays in the major air and sea ports can impact your ability to deliver on time and look at alternatives. Do you regularly send workers overseas? Look at what any impact in delaying deployment would be and finally, check with your supply chain to see what actions they are taking.
For more information, visit the EEF website.