The impact of Brexit on the Industrial sector


By SpiderGroup

General
6 June 2017

For many months leading up to the EU referendum, there was a lot of uncertainty surrounding what could happen should we decide to leave the EU. Well, the decision was made and the UK are leaving the EU, a process that began when Article 50 was triggered in March. There are still many unknowns but what is the likely impact that Brexit will have on the industrial sector?

currencyCurrency

One of the most obvious things to feel the brunt of the decision is the weakening pound against other currencies.
This will make exports cheaper as British goods will be appealing to foreign buyers as they get more for their money. As purchasing parts abroad will be expensive, it is likely that the internal market will see a slight boom.

Take car companies as an example. Around 80% of UK built cars are sold overseas and so, the impact of Brexit will be both positive and negative. The weak pound will make exports competitive but the cost of importing components will increase. One industry that will feel the heat is the British Aerospace industry which sees around 90% of income from exports.

Trade Deals

While it is still uncertain as to what deals will take place once things start moving, there is every possibility that UK-made goods could be in demand. It could mean that there will be very little impact felt from the introduction of cost-raising tariffs under WTO rules or Britain could be seen to have a market that is strong enough for other countries to eagerly make mutual arrangements that are similar to those currently in place.

industrialInvestment

For many investors, making a move now could prove disastrous and so many people are sitting tight. Holding back on investment is not an issue because manufacturing industries are commonly long-term investments which does give the industry room to breathe. Delaying minor decisions will also have very little implication, particularly if politicians can arrange similar trade deals. It will essentially mean, that when the time comes, investment will be slightly more expensive.

Confidence

Confidence is already low at the lower end of the industry yet Brexit will only make it worse. Smaller companies may refrain from holding back on making investments and purchases while their strategies are highly unlikely to include dealing with economic volatility. UK industry is currently entering its 4th revolution and that means that investors and businesses need to use this as a springboard to grow through the use of technology, digital marketing and IT to enhance confidence despite the Brexit decision.

Research and Development

EU grants help to support research that enables the development of new products. However, a level of uncertainty linked to finding the funding that replaces any lost funding is likely to mean that fewer products are developed along with fewer processes.

working on laptopShortage of Skills

Despite the talk of immigration, the British industry is still facing a potential shortage of skills. The removal of free movement could make this problem worse causing real problems for industry and lowering the chances of overseas investors choosing to build plants in the UK.

The UK industry is like any other sector following the decision to leave the EU; there are a lot of changes to face and there are many challenges to overcome but it is simply a case of wait and see. SpiderGroup would like to help industrial companies overcome the challenge, which is why we specialise in providing digital technology strategies to streamline working processes and cut costs where it’s needed. To find out how we can help your industrial business, contact us here. Or why not read our industrial eBook to find out how to improve your business efficiency?

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