Back in June 2016, Britain sent shockwaves through Europe and the rest of the world by voting to leave the European Union. In the months that have followed, there has been very little action to note, as we as a country come to terms with the decision and work out what to do next.
However, while we’re yet to trigger Article 50 of the Lisbon Treaty, our businesses are already feeling the impact of Brexit. Figures from the Office for National Statistics (ONS) show that materials and fuels purchased by UK manufacturers grew by 7.6% in price.
In addition, according to a survey by Hitachi Capital conducted by YouGov and the Centre for Economic and Buyout Research, a third of UK businesses put over £65.5 billion of investments on hold in the wake of Brexit. With Britain’s growing trade deficit, it’s easy to see why negative headlines are making the press.
But is it really that bad for UK businesses in the wake of Brexit? Analysts estimated that Brexit would cause the economy’s growth to slow to 0.3% from the 0.7% in the previous quarter. In reality, in the three months following Brexit, the economy grew by 0.5% overall. Although slower than the past quarter, the performance is stronger than predictions — but is it all good news?
During the same timeframe, growth in manufacturing slowed by 1%, a decline that is largely attributed to the weak pound in the wake of Brexit. This caused import costs to rise, which naturally shrinks manufacturing output.
While the figures only tell a part of the story, how should British businesses react to this period of uncertainty? UK manufacturer of high voltage coils, Houghton International, examines the options for manufacturing and engineering businesses in Britain’s current economic climate.
As we’ve already mentioned, the growth of manufacturing was impacted by the weak pound caused by Brexit. A drop in production for many businesses ultimately means a decrease in revenue, unless action is taken to combat the effects. One way of doing so is through moving production to the UK, eliminating the need to pay rising costs required by overseas suppliers.
Of course, this is a big investment for any business to make and it may not always be possible, depending on the size and nature of your business. However, the benefits of doing so are numerous. The businesses that currently utilise UK manufacturing are in some of the strongest positions in the UK market, attracting overseas buyers who are looking to take advantage of the weak pound.
Turn uncertainty into opportunity
A recent survey revealed that post-Brexit optimism in British manufacturing is at its lowest since 2009, when the recession hit Britain’s businesses hard. However, is the outlook really that bleak?
While the details of Brexit are still unclear, Brexit Britain gives the UK a host of new opportunities which could add significant value to businesses of all sizes. It’s yet to be seen how the decision to leave the EU will impact immigration, yet many anticipate that it will further limit the number of skilled workers available in the sector.
However, this offers fresh opportunity for industries to attract the brightest talent through improving the benefits they offer their staff. Likewise, offering training opportunities can help develop the next wave of experienced STEM workers. This is something that every business can do and is a tactic that has already been adopted by Houghton International.
Examining current production methods and ways of working could offer potential areas to maximise profits. In a time where the cost of importing materials is poised to increase, business outgoings are set to grow throughout the supply chain. Therefore, saving money wherever possible becomes a priority. While the prospect of rising costs may be off-putting for businesses, it offers a chance to review and strip-back processes to create more efficient ways of working, which will ultimately benefit your business.
While Brexit may seem like a long way off, all of the above can be implemented by businesses immediately to prepare them for the eventual EU exit.
As Theresa May has hammered home time and time again, Brexit means Brexit. It is not enough for businesses to stagnate; change is imminent and businesses need to be proactive to ensure that both they and the UK economy thrives once Britain leaves the EU.