Industry calls for stability and safeguards following Brexit vote

As the news of the UK’s vote to leave the European Union sinks in, organisations representing the engineering and manufacturing sectors have been calling for as much stability as possible in the coming months, while research institutions have been trying to quell panic

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Concerned over the future for UK trade, they also called for the government to strive to safeguard as many of the trading advantages the UK enjoyed from its EU membership possible in its negotiations to sever ties with the Union.

The vote to leave the EU was firm, even in the engineering heartlands of the UK. The West Midlands voted 59.3 per cent to leave; the East Midlands 58.8 per cent, and the North East 58 per cent. As has been widely reported, London was the only region of England that voted to remain.

Terry Scuoler, chief executive of the EEF, who had been a prominent campaigner for the Remain side, noted that the result went against his desires and those of his members. “It is not the result many businesses wanted, but it is the democratic will of our country and will quite rightly now be acted upon,” he said. “It is already clear that the decision has caused a shock – sterling has dropped and the markets are volatile. Against this backdrop it is vital that we regain stability and restore calm.”

The priorities for the EEF as regards EU trading are to maintain tariff-free access to the EU markets for goods and services; and to ensure regulatory stability, Scuoler said. The task of unpicking the relationship between the EU and UK will be complex, Scuoler said: ‘The government must tread carefully, maintaining a trading relationship with the single market, and not becoming bogged down to the detriment of making long-awaited and much-needed decisions on projects vital to our future economic prosperity.” The Federation also wants the skills gap to be addressed, and for a further focus to an integrated domestic policy to support investment, competitiveness and export performance.

James Selka, chief executive of the Manufacturing Technologies Association, echoed Scuoler’s comments on protecting trade. “Maintaining access to the single market is of paramount importance, something widely agreed on across the political spectrum,” he said. “Great care must be taken during the negotiation process to protect manufacturing’s interests and we will be working hard in the UK and in Brussels for that outcome. We believe that we can leverage UK manufacturing’s reputation for innovation and flexibility to secure the best possible deal for our members outside the EU.”

Stephen Cooper, head of industrial manufacturing at KPMG warned that the UK will have to do better in some areas. “On the jobs front, there are very real implications to the access to engineering talent. Manufacturers will need to consider their strategy. Firstly in retaining their non-UK workforce, secondly in attracting non-UK based expertise and thirdly, more long term and one for the government to support, in developing talent on a much greater scale than they do currently,” he said.”

“Investment decisions, both FDI and of UK origin, whether put on hold waiting for this vote or in the ‘normal’ course of business, will need to be reappraised. Whether manufacturers will choose to locate or develop their operations in the UK, with the possibility of tariffs in place, remains to be seen and will likely be dependent on the upcoming negotiations with Europe. Of course we are only day one after the vote and the full implications will only become clearer with the passage of time – a considered approach to the emerging position is required rather any ‘knee jerk reaction’,” he added. “Organisations will need to consider the tactical, short terms implications, particularly relating to market volatility and the impact on trading.”

The Royal Academy of Engineering was keen to emphasise its international outlook. “We will continue to work with partners both within and outside of the European Union to make the UK a leading nation for engineering innovation,” said academy president Prof Anne Dowling.

IET president Naomi Climer added: “We thought it hugely important that the role of UK engineering was considered as part of the EU debate. It was for that reason that we looked carefully at the issues affecting engineering, including the skills shortage, the global markets that engineering is a part of, research funding and global standards. We concluded that, at a time when we have a huge shortage of engineers, limiting the number of professional engineers that could come and contribute to our economy would affect the industry and the nation’s financial well being. We were very careful to consider the options as they related to UK engineering but the result of the referendum is clear and we are calling for an urgent discussion so that any negative impacts can be mitigated for the benefit of UK engineering and our country’s economy.” A weakening in the UK’s influence on global engineering standards is now a danger, the IET warned.

Naomi Climer
Naomi Climer: a decline in UK influence is a danger

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, also called for the government to do its best to maintain stability. “Government must now… secure a deal with the EU which safeguards UK automotive interests,” he said. “This includes securing tariff-free access to European and other global markets, ensuring we can recruit talent from the EU and the rest of the world and making the UK the most competitive place in Europe for automotive investment.”

For the Institution of Chemical Engineers, the environment was the priority. Voting to leave EU “must not wreck cooperation with European partners” on climate change & healthcare, said IChemE chief executive David Brown.

For the aerospace and defence sectors, ADS chief executive Paul Everett put out a brief statement saying the “Aerospace, Defence, Security and Space industries will work with government to minimise the negative impacts of the decision to leave the EU, creating an environment in which these strategically important sectors can continue to prosper.”

Finance organisation Boost Capital noted that it had already started seeing the effects of uncertainty before the Referendum itself. “In the lead-up to the referendum, Boost Capital saw a rush of SMEs applying for bridging finance, anxious about what the vote might mean for their businesses in the short-term, and, vitally, their cashflow,” said managing director Alex Littner. “Unfortunately, that uncertainty looks set to continue.” Importers should secure forward contracts to guard against further falls in Sterling, he said, but on the plus side, “Britain’s products look better value than a week ago, so canny exporters will take advantage of this by being quick to market themselves aggressively to foreign customers.” Littner also noted that Brexit is not a foregone conclusion: “There is also the fact that the referendum is merely advisory, and it will take an Act of Parliament to force a Brexit, which may not happen,” he said. “It is impossible to predict what the coming months and years will involve for Britain, both in terms of day-to-day business if we do extricate ourselves from the EU, or what the UK economy will look like once the dust has settled.”

It was in the research sector where the biggest shock was evident.

Sarah Main, director of the Campaign for Science and Engineering, said: “Science is an area where the relationship between the UK and the EU was particularly beneficial. Not least because scientists won billions of pounds of research funding for the UK (€8.8bn between 2007 and 2013), above and beyond what we put in. In addition, free movement of people in the EU made it easy for scientists to travel, collaborate and share ideas with the best in Europe and for companies and universities in the UK to easily access top talent from Europe. And leaving the EU will no doubt have huge additional impact on our universities and research businesses.

“Our government are kidding themselves if they think new ‘customised’ links with the EU can be as benign as the EU’s long-standing agreements with (for instance) Norway.”
Prof Lord Martin Rees, Trinity College Cambridge

“Science is one of the UK’s great strengths and works to keep us at the forefront of health, well being and innovation,’ Main added. “It is therefore vital that science is on the table when the difficult and myriad political decisions that follow are made, from immigration policy to regulation, in order to support a thriving science and engineering sector in the UK.”

Imperial College London president Alice Gast and provost James Stirling issued a joint statement saying: “We are determined that political changes will not hold Imperial back from delivering excellence in research and education for the benefit of global society. We will vigorously defend our international values if they are threatened and will continue to think and act internationally.” They added: “We are urgently seeking clarification from the government on the visa and fee status of non-UK European Union students, as well as other key policy areas for the College as the UK negotiates its future relationship with Europe.”

The University of Sheffield tried to calm these fears. “There will not be any immediate material change to the immigration status of current and prospective EU students and staff or to the UK university sector’s participation in EU programmes such as Horizon 2020 and Erasmus+,” it said.

Prof Lord Martin Rees, fellow of Trinity College Cambridge, warned that upheavals may still come, with Scottish exit from the UK and Irish reunification both distinct possibilities, and added that the referendum result was a ‘devastating legacy’ for Prime Minister David Cameron, who has announced that he will resign in October. “We’re landed with a frightening scenario,” he said. “Our government will be trying, of course, to negotiate new ‘customised’ links with the EU. But they’re kidding themselves if they think these can be as benign as the EU’s long-standing agreements with (for instance) Norway. You get a far better deal in a civil partnership than after an acrimonious divorce.”