Brexit has affected the UK manufacturing industry in many ways, the manufacturing sector has been an essential part of the UK’s economy, accounting for around 10% of GDP and employing almost 3 million people. Brexit has caused significant disruptions to the manufacturing industry, affecting almost every supply chain that relies on overseas trade. Brexit still remains a controversial issue, however, we will also explore some of the more positive effects Brexit has had on the UK manufacturing industry!
What are the negatives?
One of the primary ways Brexit has affected the manufacturing industry is through the imposition of tariffs and border checks. Manufacturers that rely on imports for raw materials and components have been hit hard by these new barriers. With the UK no longer having access to the EU’s single market, businesses face extra costs to import and export goods. These extra costs add up and can make UK manufacturers less competitive in the global market.
Another challenge for UK manufacturers has been the shortage of skilled labor. A significant number of workers in the manufacturing industry come from the EU, and Brexit has made it challenging for them to continue working in the UK due to changes in immigration policies. This shortage has led to an increase in wages and recruitment costs, which has further squeezed profit margins.
The uncertainty surrounding Brexit has also caused manufacturers to delay decisions on investment and expansion. Large manufacturers like Nissan and Toyota have already scaled back investments in the UK, and there are concerns that others may follow suit.
The manufacturing industry in the UK has a diverse range of sectors, and each has been affected differently by Brexit. For example, the automotive industry in the UK has experienced a significant decline in production due to the supply chain disruptions caused by Brexit. The industry relies heavily on just-in-time production methods, which are particularly vulnerable to delays at the border.
Similarly, the UK’s aerospace industry has been affected by Brexit, with some companies moving production to other EU countries to avoid the added complications of customs and regulations.
Here are a few examples of how Brexit has affected businesses and companies:
1. Jaguar Land Rover (JLR): JLR is one of the UK’s largest car manufacturers and one of the companies most affected by Brexit. In 2018, the company announced it would cut jobs at its UK factories as part of a turnaround plan aimed at saving £2.5 billion. Brexit uncertainty and declining demand for diesel vehicles were cited as the primary reasons for the cuts.
2. Dyson: The British technology firm has chosen to relocate its headquarters from the UK to Singapore, citing Brexit as one of the main reasons for the move. The company’s founder, James Dyson, was a vocal supporter of Brexit but has since criticized the government’s handling of the negotiations and expressed concern about the impact on his business.
3. Brompton Bicycle: The UK-based folding bike manufacturer has reported a 10% increase in production costs due to Brexit-related uncertainty. The company relies heavily on importing parts from the EU and said that additional customs and administration costs were driving up prices.
However, there are some positives affects:
1. Boost in exports: The weaker British pound has made UK goods more affordable for overseas buyers. This price advantage encourages exports growth in several sectors such as the automotive, aerospace, and pharmaceutical industries. For instance, the Society of Motor Manufacturers and Traders (SMMT) reported a 14% increase in the export of UK-built cars, with 80.4% of the total production destined for markets outside of the UK.
2. Encourages domestic production: Brexit could lead to the UK introducing new trade policies and industrial standards tailored to its needs, which could increase domestic production rates and foster innovation. The UK could develop new regulations and standards that make it an attractive place to produce, promote high standards, reduce bureaucracy and stimulate innovative new ideas. This could help the UK to stay ahead of the competition and increase investment in the manufacturing sector.
3. Access to new trade agreements: The UK manufacturers now have the opportunity to explore new export markets in other parts of the world outside the EU, with countries seeking to establish new trade relations Britain.The UK is now free to negotiate its own trade agreements, which could provide significant opportunities for UK manufacturers to enter new markets and build new business partnerships.
4. Greater control over regulations: The UK can introduce nuanced new and more favourable regulations tailored to its needs, without having to adhere to the EU rules. Manufacturers would have greater flexibility with regard to production requirements and specifications, which can lead to increased competitiveness.
However, it is important to note that many manufacturers are still concerned about the potential negative impacts of Brexit on their businesses, including potential supply chain disruptions, reduced demand, and a loss of access to EU funding. Overall, Brexit's effect on the UK manufacturing industry remains a topic of debate, with both advantages and drawbacks.
