What will be the effect of Brexit in the manufacturing industry?

Last year, the UK government said that it had conducted no sectorial impact assessments of the UK’s withdrawal from the EU single market. It has…

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March 28, 20185 minutes read

Navigation Brexit in the Manufacturing industry

Last year, the UK government said that it had conducted no sectorial impact assessments of the UK’s withdrawal from the EU single market. It has since rolled back from that statement, but this has only added to the confusion and uncertainty surrounding Brexit in the Manufacturing industry. Manufacturing is one sector that will be seriously affected by any changes. I’m delighted to say that OpenText has teamed with the Centre of Brexit Studies at the Birmingham City University, UK to conduct an impact assessment in two key areas of manufacturing: automotive and aerospace.

The truism that business hates uncertainty is particularly accurate when considering Brexit in the Manufacturing industry. The uncertainty surrounding the negotiations and final outcome are reaping predictable results. UK trade associations have warned the government that uncertainty is slowing investment – UK investment in plant and machinery fell for 7.5% in 2016 to 6.5% in 2017 – and lead to significant lay-offs.

Understanding the scale of Brexit in the manufacturing industry

Not everything is uncertain. Often, it’s just the detail that is unknown. Most importantly, we know that cross-border trade will change altering customs laws and regulations. If you have an extended supply chain across Europe, you’ll need to ensure you can comply with the new regulations as well as re-visiting all contracts with your suppliers and customers in Europe to ensure that you can work to the trading arrangements.

The scale of issue of Brexit in the Manufacturing industry was exposed when Honda addressed the UK parliament. The auto manufacturer told MPs that it imports 2 million components a day from Europe on 350 trucks and it has about 1 hour’s worth of stock at any given point due to its Just in Time (JIT) inventory system. Honda said that it would take 18 months to put proper customs administration in place and every 15 minutes of delay would cost them £850,000. In addition, Honda pointed out that 40% of the workers to build its new Civic in the UK were EU nationals.

At the moment – where there’s uncertainly in everything from trade agreements, contractual arrangements, worker’s rights and freedom or movement – it is difficult for an organization to make longer term plans. Our partnership seeks to address this by conducting research and in-depth analysis on the impact of possible Brexit outcomes on the UK automotive and aerospace industries.

Much needed Brexit impact studies for manufacturing

Together, the automotive and aerospace industries add £23.3 billion to the UK economy. This figure doesn’t include the revenue generated within their supply chains. The Midlands of England is a centre for both industries, generating more than a third of the total annual revenue. The companies in this area offer the ideal microcosm of the industries as a whole.

Through a combination of qualitative and quantitative research into Brexit in the manufacturing industry with some of the world’s largest automotive and aerospace companies, our impact assessments will study:

  • Various scenarios for Brexit outcomes
  • How the automotive and aerospace sectors would be affected by each scenario
  • The impact of each scenario on the companies and their supply chains
  • The threats and opportunities that each scenario could create
  • What organizations are doing to prepare for Brexit
  • What companies in each sector expect to happen post-Brexit

Would you like to know more about Brexit in the Manufacturing industry? The initial fieldwork is already underway on this important research project and we hope that we will be able to report back our initial results at the OpenText Innovation Tours in London on April 28. You can register for free here.

Brexit in the manufacturing industry: Start preparing today

Brexit remains shrouded in uncertainty and that’s likely to be the situation up to the point the UK leaves in April 2019 and beyond. But, not knowing the full extent of the final outcome is no excuse for inactivity. It’s likely that the UK will institute new records management requirements in a push for greater deregulation. Companies can reassess their information governance strategies to facilitate the process of transition to any new regime. Finally, Brexit is likely to spell an end to the free movement of labor so all companies need to audit their HR procedures to ensure they are able to comply with all the registration and reporting requirements that go with employing overseas workers.

At a time when manufacturers need to plan for efficiency and innovation, anything that holds back investment in enabling technologies is a real threat. Manufacturers must begin their plans for Brexit now and use those plans as a means to create a ‘business as usual’ scenario where they can confidently continue their much needed investment and improvements. OpenText has created an informative Brexit microsite to help you understand the issues surrounding Brexit and begin to prepare for the change.

Apart from London, Brexit in the Manufacturing industry will be a major topic at other OpenText Innovation Tour events in March and April. You can also place Brexit in the context of the latest Digital Transformation developments at OpenText Enterprise World in July.

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