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Brexit shows its face

29 September 2016

Love them or hate them, there is nothing quite like a trade exhibition to gauge the general mood of the market. Nowhere else is the opportunity presented to canvas a large number of businesses serving a similar sector in one place, and while it might have been Industry 4.0 that featured on many of the stands at this week’s Total PPMA event, it was definitely Brexit that dominated the conversation.

As the dust settles since the UK’s vote to leave the EU, for the average household in this nation of shoppers, things seem to have carried on pretty much as usual, with consumer spending showing little change. However, the picture is not so clear in the industrial world, as indicated by many of the conversations I had with both exhibitors at, and visitors to, the PPMA show.

One thing that most people I spoke to seemed to agree on was that for a good few months leading up the referendum, things were pretty tough, reinforcing the view that there’s nothing worse for commerce than uncertainty. However, since the vote to leave, things have been looking positive for some UK manufacturers, and while the weakened Pound may not be so great for your holiday spending money, it does mean that British exports are a more attractive option for buyers abroad. This was particularly the case for one company I spoke to, which exports around 80% of its output.

However, a representative of another company, also a net exporter, said that while the low Pound has had a positive impact on its order book, it has also meant that it is facing increased costs for raw materials that are imported into the UK. In this particular case, the company in question runs a very lean supply chain, and although this in itself does bring economic benefits, it has meant that it is also susceptible to the rising costs of imports resulting from the fall in Sterling. For the moment, the company is going to absorb these costs, rather than pass them on to the customer, however, this cannot continue indefinitely and indicates that purchase costs will have to rise.

For some UK businesses with parent companies abroad, both in the EU and further afield, there is a definite feeling of ‘we’ll have to wait and see’, although no one I spoke to seemed to think that there would be much investment in the UK market for the foreseeable future! And there are, of course, justifiable anxieties about what kind of trade agreement can be reached with the EU going forward.

Whatever people’s opinions, this is a huge issue for UK businesses across the board, and as quite a few people I spoke to were keen to point out, the UK hasn’t even triggered Article 50 yet, let alone actually left the EU, so what we are seeing today is definitely not a true indication of the reality of Brexit.

 
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