Viewpoint: How manufacturing companies can prepare for Brexit

Making sure businesses are ready for any sort of Brexit will involve taking taking time to understand its possible impacts, says Phil Pitman of Yolk Recruitment.

Despite the triggering of Article 50 in March, information is still relatively scarce on how leaving the European Union will affect the UK manufacturing industry. As the nature of Brexit will depend on the final agreement with the EU, the sector is experiencing a lot of uncertainty and, unfortunately, short-term thinking and planning.

Although the UK manufacturing industry has reported growth in recent months, thanks in part to the fall in value of the pound, concerns have been raised by both candidates and employers about the affect of Brexit. Businesses are still weighing up how they will be affected by Brexit and candidates have expressed fear and anxiety over the unsettled future.

The prospect of Brexit is impacting on companies’ confidence, with many only investing to fulfill immediate plans. Companies are putting their long-term ambitious business goals on hold until they gain more clarity on the situation, with some pausing investment entirely.

Although there is a lot of noise around the topic, that’s all it is at the moment – noise. Companies need to start understanding what their businesses look like and start recruiting for their long-term business needs. This will position companies to think honestly to mitigate the risks that Brexit might bring.

As companies in this sector are tightly run and margins are relatively slim, any change would have a massive impact. UK businesses currently enjoy trade with the EU without tariffs or quotas. In the event of new trade deals following Brexit, it’s likely that tariffs will be imposed on EU goods as well as the possible introduction of additional border controls. Manufacturing companies currently rely on the smooth flow of goods and people between the UK and EU. Airbus, for example, makes about 80,000 employee trips a year between the UK and the EU and exports more than £6bn worth of product into the EU*. One delay to this process would back up the entire chain. Even completing additional administrative tasks would cause significant delays

Although the sector cannot be fully prepared until the full outcome of Brexit is clear, companies can begin to plan to allow themselves to react faster when changes occur. There are a variety of things to consider in the manufacturing industry including trades and custom and import and export VAT. Until the costs and tariffs are known, companies can begin to prepare by taking the time to understand their line of manufacturing and current distribution routes. Any change would play a significant part in pricing and overall profitability. Carrying out a cost benefit analysis would also be beneficial to estimate the strengths and weaknesses of alternatives. Some companies may need to build up stock and some may even need to consider relocating.

Businesses should inform themselves by looking at their current obligations to existing agreements. This will place them in a position to think honestly and limit the possible impact

The possibility of restrictions of the free movement of people within the EU would present another challenge to the manufacturing industry. Restrictions on the movement of people between the UK and the EU may have as much of an impact to businesses as any restrictions on trade. If EU migrants are forced to leave the UK, it could create issues with the sourcing of labour in factories and other parts of the supply chain. To prepare, we would encourage companies to carry out an audit of their current workforce. Understanding their existing staff can allow companies to maximize the return from the workers they do have. The future of the business could then be reviewed and the need to recruit for long-term goals will become clearer. The need to recruit additional people to lower-skilled roles such as administrators needs to be taken into account for additional processes that may be enforced due to Brexit

Employees are expressing concerns over the long period of uncertainty. Communication is key during this period. Employers should be honest with their employees and encourage them to openly voice their concerns. Lack of communication can lead to increased stress and anxiety, which will affect performance. Team meetings including every member of staff will provide opportunities for any concerns to be raised and addressed. Taking a proactive approach will help reassure employees, helping them to remain engaged and productive

Businesses should begin to put contingency plans in place to protect themselves from whatever type of Brexit happens. From reassessing supply chains, reviewing current obligations and looking at future recruitment plans, the changes should see companies find ways to improve the way they operate today. Brexit will see each company face different challenges. It’s not a ‘one size fits all’ scenario; it will come down to the needs of each specific company. Employers come to recruitment agencies like ours for recruitment support but also for advice and guidance on how to position themselves in the marketplace. Manufacturing companies should not be afraid to get advice from recruitment agencies as they have a lot of knowledge of the market and can help with advice to protect businesses from whatever type of Brexit happens.

Phil Pitman is the divisional head of engineering and technical recruitment at Yolk Recruitment, a South Wales based agency that recruits across the UK. Phil provides specialist recruitment support to Wales’ diverse engineering, manufacturing and technical sectors, from aerospace and automotive to food and pharmaceutical.