Report finds Brexit will harm UK manufacturing

IOM3 Content Cafe
24 Jun 2020

Brexit will have significant adverse effects on a UK manufacturing sector highly integrated with the EU single market, and that disruption will have a sizeable negative impact on the wider UK economy, claims a new report by UK in a Changing Europe.

The report, Manufacturing and Brexit, reviews the effects Brexit on the UK manufacturing sector, and notes that the extent of disruption depends on the outcome of the UK-EU negotiations. A worst-case scenario would be no trade deal between the EU and the UK. This would introduce delays at the UK-EU border harming supply chains. Manufacturing will be negatively impacted, and some sectors, such as volume automotive production will particular badly affected, just as they are trying to recover from the effects of Covid-19.

The report indicates manufactures are especially worried about the UK falling out of common EU regulations. They want UK and EU technical, safety, and other regulations to remain aligned thus avoiding  making products to different specifications for the UK and EU markets or having to carry out safety and other tests twice.

Potential additional financial costs for companies may arise from tariffs, customs declarations, certification costs, audits, loss of R&D collaboration, border delays, EU customers switching to other suppliers, and visa costs for EU workers.

The importance of manufacturing for the UK economy far outstrips its relatively small size (10% of the UK economy). Manufacturing accounts for a disproportionate share of total exports (45%) and 65% of private sector R&D spending. The report notes that impact on UK manufacturing will have a major effect on the broader economy.

Several actions are suggested to government in the report –

  • Investing much more in an industrial policy, bringing the UK in-line with other advanced economies
  • Targeting specific sectors or regions
  • Particular firms can be helped to take advantage of new technologies that are part of the fourth industrial revolution
  • Introducing new policies on skills, R&D, financial support, wage subsides, tax deferrals, taking equity stakes in companies
  • Transferring more power to UK’s regions and devolved institutions to develop more place-based industrial policies.