Preparing West Midlands manufacturers for Brexit

The threat of Brexit is well-known to West Midlands business leaders but, for manufacturers, the time has come to make concrete plans. Last week we at EEF, the manufacturers’ organisation, launched our Brexit roadshow series conference in Birmingham.

As an established UK manufacturing hub, the city was an obvious choice; since 2010, manufacturing jobs in the West Midlands have increased 9.9 per cent, more than four times the national growth rate.

The challenge for these businesses is very clear. A survey we conducted earlier this year over 70 per cent of our manufacturing members held the view that membership of the EU single market (and customs union) was vital to their business model. With the next stage of Brexit negotiations looming, manufacturers now face a future outside of both. Understandably, they need to know how to prepare.

We were pleased to welcome around 100 local figures from within the industry, as well as a series of high profile guests, including West Midlands Mayor, Andy Street and a number of other senior Government representatives.

The first question on our agenda was “what does a favourable Brexit look like for the West Midlands”? The Government is right about new opportunities with the rest of the world but this is a longer-term objective. Businesses also need to consider what is in front of them now.

Mike Josypenko, director of special projects at the Institute of Export & International Trade, suggested: “Minimal disruption to trade rules and relationships, minimal tariffs and no blockages to the customs union, continued labour migration, no heightened conflict in Northern Ireland and an adequate transition period."

Such an arrangement may be unlikely but, on the two crucial issues of trade and migration, there are clear steps that manufacturers should be taking to ensure that business is still booming in March 2019.

Trade

On trade, the European Union remains the UK manufacturing industry’s single biggest trading partner. By potentially removing the building blocks of this relationship – the single market and the customs union – the manufacturing industry faces a costly and difficult exercise.

To minimise this damage, we’ve established four recommendations for Government. Firstly, they need to ensure the UK becomes a fully-fledged World Trade Organsation member as soon as possible, providing us with better access and non-discriminatory treatment when trading with other countries. Secondly, there needs to be a significant transition period, so the manufacturing sector can adjust to the significant changes in the trading environment.

It’s also vital that we maintain ‘frictionless’ trade, by retaining zero tariff rates, agreed rules of origin, mutual recognition and enforcement of customs border procedures, the prevention of other potential non-tariff barriers and ensuring the UK can strike trade agreements with the rest of the world. Finally, and perhaps most importantly, Government has to engage in close consultations with the industry going forward, including formalising a joint mechanism that sets out the general approach and objectives in the ongoing negotiations.

Businesses should be doing everything they can to support and inform Government on these issues. But there are also internal measures that can be taken for those businesses that export goods to/from the UK and EU, such as mapping your entire goods flow in and out of the UK; analysing possible points in the supply chains where new tariff-related costs and processes may be required; studying the additional tariff cost burden on product price, supply chain operations and competitiveness; examining customs requires for all imports and exports and so on.

Migration

A deeply political and sensitive issue, skills and migration is something businesses can do less to mitigate against, such is the onus on the state to educate, upskill and import talent where necessary. However, there are still things our industry must ask of Government. Most crucially, we need to ensure that we’re still admitting highly-skilled workers into the UK as they are currently in short supply. It’s not just highly-skilled employees that are lacking, however. We also need to enable employers to continue to recruit lower-level skilled workers, subject to requirements – given there are regions around the UK sitting at near full-employment.

To further develop and upskill the existing pool of workers we have in this country, the Government also needs to maintain a programme whereby UK businesses can send UK workers to the EU and receive EU workers in the UK. Finally, and as with the issue of trade, a period of transition is imperative: helping to fully introduce changes to free movement.

An ever closer union

Andy Street, West Midlands’ Mayor, outlined some smart schemes at our conference towards resolving the above two issues, including building a regional framework on some of the money from the apprenticeship levy, Ofsted judging schools by employability indicators, the launch of WM’s own industrial strategy in April 2019 and so on.

It’s now the responsibility of West Midlands manufacturers and Government to work hand in hand to deliver upon these and position the West Midlands at the forefront of the fourth industrial revolution, irrespective of our European Union member status.