We are still less than 24 hours since British voters legitimately shocked the world by casting their ballots to exit the European Union, and just about everyone has an opinion. Here are a variety of perspectives from and about the manufacturing world:
Stephen Cooper, head of industrial manufacturing at KPMG UK: “The possibility that many manufacturers feared has come true. So what next for manufacturing businesses in dealing with the manifold implications of the exit vote? Given the significance of trade with Europe and trade agreements negotiated through the EU, there are significant implications for the supply chain, such as the application of tariffs. Ensuring a full understanding of the supply chain past Tier 1 suppliers and beyond is vital to assess potential actions required. Our recent report on the sector revealed that just 13% of global respondents have “complete” visibility past their Tier 1 suppliers and into their Tier 2 so this may not be as straightforward as some might hope.
“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.
“We should not lose sight of the fact that this result can also lead to opportunities for manufacturers: a drop in the value of sterling could make the UK a magnet for trade, and the need to reshape trade policy may result in quicker decision making, and reduced red tape.”
Chad Moutray, chief economist at National Association of Manufacturers: “More than anything, the Brexit vote has added yet another element of uncertainty into the marketplace, which could further undermine growth within Europe and potentially globally. From that perspective, the result in Britain adds to what has already been an unpredictable year. If you are a manufacturer making hiring and capital spending plans, there is a lot to be worried about globally. While the most recent NAM Manufacturers’ Outlook Survey reported slightly better expectations than three months ago, manufacturers’ international assessments clearly mattered. Those companies that were more positive about exports were more upbeat in their economic outlook and vice versa. The bottom line in those findings, however, was that respondents remained quite cautious, with overall activity well below where we would like to see it.
“It is important to note that Europe is a key market for manufacturers in the United States. U.S.-manufactured goods exports to Europe, our second-largest trading region outside of North America, totaled $280.6 billion in 2015. In addition, the United Kingdom is our fifth-largest trading partner ($48.6 billion), with Germany at No. 6 ($44.6 billion). What’s more, manufacturing companies have a significant presence in Europe, including headquarters and production facilities. As such, we need a strong and vibrant Europe — one that continues to buy our products. That is true regardless of whether the United Kingdom is part of the European Union or not. … It does create some challenges for businesses, particularly those that have a presence in the United Kingdom as a gateway into Europe. This is especially the case for the financial sector in the United Kingdom, but it is also the case for manufacturers. Those firms will likely watch the upcoming negotiations closely, ensuring that their ability to trade with the continent and others remains unabated.”
Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce: “While some uncertainty is unavoidable in the near term, the first order of business will be to reassure investors about those choices and avoid precipitous action in the coming negotiations with the EU. Britain has a proud history of leadership in free enterprise and free trade and as a leader of the Atlantic Alliance. Redoubling this commitment to openness in trade and investment, prudent but not overbearing regulation, and close cooperation with friends and allies abroad will be essential in the months ahead.
“American companies’ investments in Britain are worth more than half a trillion dollars, and many of those investments were made to reach not just British consumers but those in the European mainland as well. We are committed to working with the U.K. government to ensure that the priorities of these stakeholders are taken into account in the debates that lie ahead.”
Linda Dempsey, vice president at National Association of Manufacturers: “Businesses operating in the United Kingdom will undoubtedly see a change in the legal regime governing a wide range of their activities after separation, as U.K. rules will be substituted for EU directives and regulations. The extent of these changes, for better or worse, will be determined through the course of the negotiations and subsequent U.K. lawmaking. Yet, for U.K. manufactured exports going into the EU, EU standards and regulations are expected to continue to apply for those goods to be eligible for sale, as EU standards and regulations apply to U.S. exports. Similarly, the United Kingdom will be negotiating a new trading relationship with the EU, which may impact all businesses engaged in those markets. In particular, the withdrawal agreement will determine the tariffs and other terms of trade by which manufacturers in the United Kingdom access the EU market and EU manufacturers can access the U.K. market.
“Early indications are that the Brexit vote will be a drag on pace and trajectory of the TTIP negotiations. Before yesterday’s vote, it had become increasingly clear that the differences separating the United States and EU in the TTIP talks were looming larger than the many areas where we have common objectives and perspectives, creating major headwinds to TTIP completion this year. With the UK and EU now preparing to enter into a several-year withdrawal negotiation, it is unclear exactly how the TTIP talks can continue apace. Furthermore, the loss of the U.K. voice within the EU is likely to create even more differences between the United States and the EU, making harder for manufacturers in the United States to achieve their goals. Talk of a U.S.-UK free trade agreement buoy some, but will frankly have to wait for the UK to unravel its relationship with the EU first.”
Alan Tonelson, economist: “One of the biggest worries of Brexit opponents entailed the possibilities of contagion — a “Leave” verdict encouraging similar EU opponents throughout the Union. And copycat Brexit votes are clearly back on the table, given widely acknowledged structural defects in the eurozone (a common currency area that includes 19 of the 28 — counting the UK — EU members, and that Britain never joined), Europe’s especially weak recent economic performance, and controversial EU decisions to admit large numbers of Middle East refugees.
“Their success would be a genuinely historic, and indeed seismic, development, as Europeans themselves since the end of World War II have generally acknowledged that closer, more regularized economic ties were essential for breaking their centuries-old cycle of major conflict. It’s possible concerns about keeping Europe peaceful are overblown. For all the importance of economic integration, the main pacifier of the continent has been the American commitment to European defense embodied in the North Atlantic Treaty Organization (NATO). Brexit per se does nothing to change the UK’s role in the alliance.”
Ashley Craig, partner and co-chair of the international trade group at Venable, and Lindsay Meyer, partner at Venable: “Many U.S. companies have established in the UK because, among others, they access to a large pool of qualified employees from other EU countries. According to EU legislation, EU citizens are largely free to pursue employment opportunities in any EU country, including the UK. If the UK leaves the EU, this will likely no longer be the case. While EU citizens currently employed in the UK may be permitted to remain in the country, further migration of EU citizens will be subject to serious restrictions. Accordingly, U.S. businesses – including law firms – may experience a shortage of talent from other EU countries.”
TD Economics: “Outside of Europe, direct trade spillovers are relatively small: Canada sends about 3% of its annual goods exports to the UK, while the U.S. sends about 5%. ... In the U.S., the states who sell more than 5% of their annual goods exports to the UK include New York, California, Texas, Utah, South Carolina, and Washington state. Although spillovers via direct trade channels are small, financial and confidence spillovers could exact a larger toll on the Canadian and U.S. economies from the deterioration in stock market wealth and the rise in global economic uncertainty.”