How harmful will Brexit be for UK manufacturing?

Dr Steven McCabe, Associate Professor, Birmingham City University expresses his views on the post-Brexit future

The debate prior to the referendum on membership of the EU on 23 June was characterised by an intemperate tone and fog of claims and counter-claims as to what the impact would be of voting for or against remaining. Hard facts were, to say the least, hard to ascertain. Speaking as an academic who deals with economic data, I’m used to making judgements based on extrapolation of trends and, to be honest, using expertise to make a call. However, I do wonder what the average person made of assertions based on emotion that seemed to be intended to generate hysteria?

It’s important that I acknowledge my stance was firmly remain. This was borne of a belief that a vote to leave would generate a wave of uncertainty that would undermine confidence in business that, some eight years on from the GFC (Global Financial Crisis), is still all-too fragile in many parts of the country.

I have spent the vast majority of my life living in Birmingham which is at the heart of the Midlands in which a significant proportion of the UK’s manufacturing is located; most especially the supply-chain for automotive production.

Though the last 35 years may have seen a vast reduction in the contribution of manufacturing to the UK’s GDP – down to 10% from 30% – it is nonetheless still crucial in terms of economic development and through exports. Though the numbers employed may have fallen, this sector has made tremendous effort to become vastly more competitive through increased productivity and a focus on excellence that make our goods attractive to purchasers at home and abroad. Any change that potentially undermines manufacturing is unwelcome. The vote to leave the EU represents such a change and is likely to have profound consequences for the prosperity of the UK, manufacturing in general and the Midlands in particular.

The vote to leave the EU means that long-established relationships are now subject to the caprice and possible retribution that will be part of the negotiation of the UK’s exit from the so called ‘single market’

The decision by the UK to leave the EU is not welcome in the Midlands which, when the East and West are combined in terms of value, exported more to this market than any other region – £20.72bn. A significant proportion of this sum is made up of the high value goods that are manufactured by companies operating in the Midlands. Whilst there is no guarantee that those who purchase such goods will purchase from competitors elsewhere, the vote to leave the EU means that long-established relationships are now subject to the caprice and possible retribution that will be part of the negotiation of the UK’s exit from the so called ‘single market’.

Strategic decision-making by major companies is carried out on the basis of what is in the long-term interest of the business. The Midlands has hugely benefited in recent years from investment by such companies. If the vote to leave has the consequence of reduced investment in, for example, new productive facilities and research and development into innovation in manufacturing capability, though this region will be affected, the whole of the UK will suffer.

Those who voted to leave the EU may have done so on the basis of believing the UK will, in the long-term, prosper. This may be the case. However, the portents suggest quite the contrary. For example, OECD (Organisation for Economic Co-operation and Development) believes that the UK’s decision to leave the EU could result in a 3% loss in GDP by the end of the decade, will result in a decline in foreign direct investment and will negatively impact on employment. Additionally, jobs advertised online dropped by 47% in the week following the EU referendum, indicating that UK-based companies are pessimistic about the prospects for growth.

Can those who voted to leave the EU consider this to be in the collective interest of the UK?

Dr Steven McCabe is Associate Professor, Department of Management, Human Resources and Enterprise Business School at Birmingham City University.


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