Brexit for the makers

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A few weeks ago it was simple.  Brexit meant Brexit. But, inevitably, there are different flavours of Brexit emerging – hard Brexit, soft Brexit, Brexit-lite – and I wager that’s just for starters. Here I recap on some of the main components of Brexit for the makers.

It may feel as though a whole new vocabulary has been borne out of the referendum (fun fact, the term Brexit was first used back in June 2012).

Over the coming months, we’ll try to give our take on what all of this means for manufacturers. I’ll start with what we see as some of the negotiating priorities for the sector.

Selling goods and services into Europe

 

EEF’s recent EU Referendum Survey showed that amongst the exporters who responded nearly half send more than a quarter of their overseas sales to customers in the rest of the EU.

 

Sure, it’s not growing as fast as other markets, but the EU should still be the third biggest market in the world a decade from now. So the ‘hard Brexit’ option of having no special deal on access to the single market would not be the preferred option for many manufacturers.

Rather, a trade deal with the EU must come first. It will not be easy to quickly substitute EU customers for ones in other parts of the world, including emerging markets. The UK must, therefore, prioritise the conclusion of an ambitious and comprehensive agreement on trade with EU partners.

In practice this should mean that trade is not impeded by the imposition of tariffs by either party and goods exports should continue to meet mutually recognised product standards to support ease of movement of goods across the EU.

Manufacturers are increasingly exporting services and currently the sector has a trade surplus in services. While few free trade deals currently contain provisions for services, a new agreement with the EU must ensure that UK manufacturers have access to the developing single market in services.

And to other markets

The UK has benefitted from Free Trade Agreements agreed between the EU and some 50 partners and we should continue to benefit from these agreements. These Free Trade Agreements should be rolled over, and the conditions of trade maintained, without the UK seeking to renegotiate existing trade deals with these trade partners.

Certainty about the regulation landscape

Is there an opportunity from Brexit to lower the regulatory burden – one in six manufacturers think there might be.

But this will need a considered approach. A big bang ‘Great Repeal’ bill on regulation could well bring its own set of issues as UK law is intrinsically interwoven with EU law. Manufacturers would rather see a clear roadmap for how the process of disentanglement would be managed. This would mitigate the risks of added business costs, uncertainty and discouraging companies from trading or expanding abroad.

There must be consultation with manufacturers on the development of a comprehensive legislative review to assess where legislation should be retained and what impact this may have on manufacturers and on trade with the EU and globally.

Holding on to and attracting the right skills

Potentially. Strike that, definitely the thorniest of all the negotiation issues is migration. Neither the hard or soft Brexit option would see the same degree of migration from the EU as is the case now.

62% of EEF member companies see the benefit of the freedom to recruit staff with difficult-to-find-skills.

But for a sector that has grappled with unresolved skills issues for decades, access to a pool of qualified employees beyond our borders is pretty important. So assuming the status-quo is off the table, we need a new immigration policy which allows manufacturers to access the workers needed to plug this gap.

The negotiations must deliver a migration system which enables manufacturers to continue to access these skills, for example by giving STEM workers a priority in the immigration queue through a highly-skilled STEM fast-track system developed in consultation with industry.

Getting the makers' voice heard

In the coming weeks we'll be talking to manufacturers in more detail about their vision of 'Brexit for the makers'. EEF members can get involved by getting in touch with their regional offices and you can track our influencing progress by signing up to our intelligence briefing and following us on social media.

 

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Chief Economist

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