Brexit beyond leaving the EU: What does this mean for manufacturing and aerospace industries in the UK?
On a delightful sunny day this September, Gregg Latchams hosted ‘What does Brexit mean for the South West’s manufacturing and aerospace industry?’ in the historic Thornbury Castle. With a room full of guests from consultants to packaging solutions providers, we heard from expert speakers including Modwenna Rees-Mogg of Angelnews and The Pluralists Club, Adrian Harding from West of England Aerospace Forum (WEAF) and former trade negotiator Matt Griffith of GWE Business West.
Where are we now
Talks began by establishing where we are now, with a general consensus around the room that nothing much has changed other than the drastic drop in the value of the Pound Sterling by 13-14%. Many agreed that Brexit was unexpected and that it has created uncertainty amongst all, but now that it has, we need to start thinking about what will happen and to take control. We also need to give our trade negotiators some context in terms of our starting position and desired outcomes. There was a lot of debate and mixed opinions on when Article 50 will be activated, with some saying they don’t think it will even happen in the short to medium term.
Additionally, the cost of leaving the EU has yet to be clarified, but it is expected that it will cost billions with many niche problems to be resolved to get the results we want. An example is the Scottish fishermen who were invited to bid at auction for fishing licenses but from whom no bids were received so the concessions were sold to the Spanish to allow them to come into our waters with a legitimate license.
More broadly, some of the main concerns across the room were to do with freedom of movement and trade with the EU. As the UK very much relies on this, it was agreed that it needs to be one of the first negotiations to take place as many businesses depend on it for trade and access to skilled workers. Many contributors agreed that the red tape will not disappear; we will simply be left with UK versions of existing regulations and legislations as we still need this to be there in order to trade with the EU.
Short-term, many contributors identified the opportunities that exist due to the competitive advantage exchange rates are currently giving us. The group admit that it is difficult to know what the medium to long term will hold for us, as this very much depends on outcomes from the negotiations still to take place.
Discussions then lead on to Brexit as disadvantageous to UK business in future. For example, it could have a negative impact on UK attractiveness to investors, despite their time-zone advantage. This also has potential to be jeopardised as many continental Europeans have been trained in the UK in financial services. Brexit could also have a huge impact on research and development, and more specifically the important collaborative projects that generate a lot of revenue for us, for which we have been receiving EU funding.
It was made clear from discussions that loyalties of the aerospace industry are very different to those of the automotive industry. Though it is expected that the aerospace industry will remain in the UK, many also foresee that it will need to work much harder as an industry to win business. In contrast, automotive companies in the UK depend on frictionless movement of people and products. With their highly connected EU supply chain and plants based in different EU countries, the decision to build the next new model in the range can be easily switched out of the UK. With the possible exception of high value British brands (where being a British manufacturer is important), companies with headquarters in other parts of the world are likely to start to move elsewhere.
Following this, discussions turned to global trade. The EU now only accounts for 15% of world trade, and Brexit could give us an opportunity to target the wider global market. An example from the aerospace industry was used to illustrate the fact that opportunities do exist where we may not necessarily expect it: Ukraine has a large aerospace industry that used to depend on the USSR. They have fleets of aircrafts that cannot fly as they do not have the replacement parts needed and they require skilled people to re-engineer this. It is likely to be important for us to turn to the other 85% of world trade.
Will we still be a United Kingdom? Conversations around this topic generally concluded that we believe not. With Scotland already holding a strong and changing identity, we could see Northern Ireland join their Irish neighbours to remove a physical border and perhaps Wales, following Scotland’s lead, could leave England as the sole home country outside the EU.
Although it is difficult to draw conclusions from Brexit, it is expected that changes will happen slowly and we may find that, for all practical reasons, the UK won’t really leave the EU and our relationship will simply be a re-named version of what currently exists. However, were we ever really a part of the EU? Contributors pointed out that our taxation is independent and the UK did not adopt the Euro, so maybe we were only ever half-in anyway.
So, what should businesses do? It was discussed that we need to remove uncertainty and replace this with opportunity. In addition, we need to establish who our customers are, where our growth markets are, what our relationship is with the EU, and how we put a business case to secure investment. Finally, we need to elbow ourselves to the front of the queue to make sure we get what we want out of the negotiations.