Future of Manufacturing Special Report 2016

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at the end of October, represents a major corporate endorsement for post-Brexit Britain. With 80 per cent of the cars pro - duced in Sunderland sold overseas, uncertainty over possible trade tariffs was of particular impor- tance to Nissan. Following a pledge of a package of support from the government, the car maker has decided to stay put, but bosses of smaller manufactur - ers across the UK are weighing up similar concerns. Brandauer is a 154-year-old press- ing and stamping business. It is one of the largest of its kind in Europe, making precision metal compo- nents for international customers involved in the automotive, con- struction, green technologies and medical sectors. It might appear to be a prime can- didate to benefit from the collapse in sterling, but things are not quite that straightforward for the Bir- mingham-based business. "We have requoted all recent euro and dollar opportunities, and these [lower] prices have started to raise eyebrows, but [we have had] no firm decisions in our favour as of yet," says Rowan Crozier, chief executive. Instead, despite being a proud exporter sending 70 per cent of its produce abroad, the company is in fact concerned about any further decline in the weakened pound. "There is genuine concern around the long-term increase of raw mate - rial costs and there are already the first murmurings of threats from eurozone suppliers of future price increases," he says. There are also fears about the abil - ity to hire skilled staff from Europe. "The single market and movement of skilled labour are absolutely vital for UK business. Will they be deliv - ered to the satisfaction of all inter- ested parties? No, I can't see it I'm afraid," says Mr Crozier. "We employ… people from coun- tries such as France, Estonia and Ro- mania. Of course, we try and employ locally where we can, but sometimes there just isn't the skill base availa- ble, and these guys and girls come over and bring real passion, com- mitment and skill to our business. "When I talk to them they are feel- ing a little concerned, driven by the lack of certainty around a govern- ment plan. I can't help but feel the plan is too vague currently." CONCERNS OVER EU TARIFFS What effect would a 10 per cent tariff on all exports to the EU have on UK manufacturers? A ny manufacturers who feared an economic melt- down in the immediate aftermath of Britain's vote to leave the European Union must have taken comfort from re - cent economic data. September's Purchasing Manag- ers' Index (PMI) figures saw factory activity grow at its fastest pace in more than two years, as the weak- ness of post-Brexit sterling helped industry towards its best quarter of growth of 2016. Mec Com, a mid-sized busi - ness which provides services in- cluding sheet metal fabrication and electro-mechanical assem- bly, is among the manufacturing businesses enjoying a surprise post-Brexit upswing. Richard Bunce, managing direc - tor of the Stafford-based company, estimates sales are about 12 per cent up since June's referendum, mostly driven by new export deals. "We have secured about £2 mil - lion of new business," says Mr Bunce. "I'm not sure what we all ex- pected the morning after the night before [in June]. So far, I can only report growth across all areas of the business, and we hope and plan for this [to continue]." Those who argue the forecasts that Brexit would spell economic doom were overstated have seized upon the PMI data, which also showed manufacturers taking on additional staff to cope with higher demand. It is evidence, they say, that the marked decline in sterling is an overdue devaluation that could help rebalance the British economy away from a reliance on imports and con - sumption towards production and international trade. "After an expected few weeks of decision-making stasis, caused by the reaction of the markets to Brexit, the real economy has large - ly returned to business as usual," says John Longworth, former boss of the British Chambers of Com- merce, who left the role to cam- paign for Brexit. "The rebasing of the value of ster- ling… is a massive opportunity for UK manufacturing and this part of the economy should make hay while the sun shines." Mr Longworth argues that previ - ous falls in sterling had not been capitalised on because they were short term in nature. "This time it will last, so it should have a positive impact domesti - cally through import substitution and through reshoring, which is happening any way because of quality and lead-time issues, and by boosting exports. "Most countries are secretly trying to devalue [through] com - petitive devaluation and the UK has been given a golden, free gift." Yet even for factories enjoying something of a mini post-Brexit boom, the mood is one of uncer - tainty. Fears over access to inter- national workers, Europe's single market and external investment are among the looming dark clouds. Recent talk of a "hard Brexit" may have helped some exporting man - ufacturers in the form of a further slump in the value of the pound, but it was additional cause for concern for the EEF, the manufacturing em - ployers' organisation. A recent EEF repor t warns against r ushing through a "clumsy" Brexit plan that could do lasting damage to manufacturers. The EEF says it is "critica l" that the Brexit negotiations deliver unrestricted access to the single market. It points out that more than eight in ten manufacturers (84 per cent) expor t to the EU. The hard line coming from the May government is renewing fears that access to vital European customers and skills will be compromised. In the event no trade deal with the EU can be agreed, the EEF says that the fallback option of using World Trade Organization (WTO) rules to govern exports could prove costly. W hile the EU would not be able to impose discriminator y or pu - nitive tariffs af ter a U K exit due to W TO r ules, the EEF says new tariffs would still be imposed on around 90 per cent by va lue of the U K's goods expor ts to the EU, which could ma ke U K expor ts less price competitive. The group warned that three quarters of the 500 companies it surveyed in August said a 10 per cent tariff on exports to the EU would have a negative impact on their business. A n xiety grew when Nissan sug - gested Brexit had given it pause for thought on whether or not to produce the nex t model in its a ll-conquering Qashqai range in Sunderland. The Wearside Nissan factory is one of the region's biggest employ - ers and of critical importance to the manufacturing supply chain. The car manufacturer's decision to stay in Sunderland, announced BREXIT JAMES HURLEY Source: EEF 2016 The hard line coming from the May government is renewing fears that access to vital European customers and skills will be compromised UK makers march on despite Brexit… The real test for manufacturers is not the change that Brexit brings, but how they respond to the change Share this article online via raconteur.net Bloomberg/Getty Images Nissan's decision to build its new Qashqai and X-Trail models in Sunderland safe- guards more than 7,000 jobs 73% of UK manufacturers see the advantage of having one set of trading rules and regulations in Europe Source: EEF 2015 Strong positive Moderate positive No impact Moderate negative Strong negative 74% of manufacturers believe that a 10 per cent tariff on all exports to the EU would have a negative impact on their business FUTURE OF MANUFACTURING raconteur.net 04 RACONTEUR 22 / 11 / 2016

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