Brexit: Industry bodies call for ‘clear’ exit strategy
24 Jun 2016
A vote in favour of the UK withdrawing from the European Union has prompted industry trade bodies to call for a period of calm and a clear exit strategy.
The final result of last week's referendum has revealed that 52% of the UK voted in favour of withdrawing from the European Union.
In light of that result, several major process industry trade bodies have urged the government to ensure the stability of the country’s economy and trade arrangements, while also calling for calm.
This morning I am calling on the government to work hard on securing the best exit plan for the UK and then establishing the new trading arrangements
Steve Elliott, chief executive of the Chemical Industries Association
Steve Elliott, chief executive of the Chemical Industries Association (CIA), which represents chemical and pharmaceutical businesses across the UK, said: “It is not the decision that our sector wanted, but we fully respect the wish of the people for change.
“This morning I am calling on the government to work hard on securing the best exit plan for the UK and then establishing the new trading arrangements.”
However, Elliott said that while there is need to progress negotiations as soon as possible, uncertainty needs to be limited.
“We also need an immediate period of calm reflection to minimise instability,” he added.
According to the CIA, the chemical and pharmaceutical industry adds £15 billion of value to the UK economy every year from total annual turnover of around £50 billion. It said this represented around 10% of the value added by the whole of manufacturing.
Meanwhile, manufacturers’ organisation EEF said that although the result is not what many businesses wanted, government must now reassure the markets and shore-up business confidence.
EEF has also called for a period of calm.
“The process of leaving the Union will take some time, and the government should not rush to instigate Article 50 and the formal exit process, while there is so much uncertainty,” said Terry Scuoler, chief executive officer of EEF.
“We need a clear vision for a new relationship between the UK and the EU, but we must also avoid throwing the baby out with the bath water,” he said.
Scuoler added that the UK must also ensure the skilled workers we need are still encouraged and enabled to live and work in the UK.
Gareth Stace, director of UK Steel, said the decision would send shockwaves throughout the UK’s steel industry.
“It is now more essential than ever to create the right business conditions in the UK that allow the steel industry to survive, invest and thrive,” Stace said.
The process of leaving the Union will take some time, and the government should not rush to instigate Article 50 and the formal exit process
Terry Scuoler, chief executive officer of EEF
“This will ensure that our vital supply chains, such as defence, automotive and construction, can rely on the production of steel in the UK so we are self-sufficient and can never be left at the mercy of others.”
Trade body Oil & Gas UK, which remained politically neutral in the run up to the referendum, said it respected the democratic decision of the UK people and was ready to move forward.
“We hope that all those involved will now come together and work constructively to make this transition as smooth as possible and we ask that the UK Government clearly outlines the process which will follow to minimise any potential period of uncertainty,” Oil & Gas UK said.
The Institution of Engineering and Technology (IET) has called for an urgent discussion to mitigate the impacts of a leave vote on the engineering sector.
The IET said the vote to leave the EU could result in a number of negative impacts on UK engineering, including exacerbating the UK’s engineering and technology skills shortage by making it more difficult for companies to recruit engineers from other EU countries.
Other issues it identified included changes to access to global markets and companies, a decline in funding for engineering and science research, and a weakening of the UK’s influence on global engineering standards.
Naomi Climer, IET president, said: “We were very careful to consider the options as they related to UK engineering but the result of the referendum is clear and we are calling for an urgent discussion so that any negative impacts can be mitigated for the benefit of UK engineering and our country’s economy.”
Jonathan Robinson, principal consultant for energy & environment at research firm Frost & Sullivan, said that in spite of the uncertainty in the general market, the impact on the energy and environment sector had been more muted because member states already had quite a lot of independence.
"The most immediate effect in the energy sector will be the negative impact of an increase in petrol prices, due to a weaker pound. However, this is merely a result of a fluctuation in the relative value of the currency. With the Bank of England providing strong statements to intervene at a moment’s notice, this is not expected to a have sustained impact on the market," he said.
“However, given that UK is the first member state to leave the EU, there is uncertainty regarding the path ahead,” added Sarwant Singh, Frost & Sullivan's managing director for Europe.
Given that UK is the first member state to leave the EU, there is uncertainty regarding the path ahead
Sarwant Singh, Frost & Sullivan's managing director for Europe
“This could trigger a dip in business sentiment and delays in Foreign Direct Investments. On a positive note however, Brexit could pave the way for Britain to expand trade relations with the rest of the world beyond EU, and this would especially help mitigate risks arising from excessive reliance on one trading partner.”
Stephen Cooper, head of industrial manufacturing at KPMG UK said a decision to leave would have significant implications for the supply chain, such as the application of tariffs.
"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.
“Whether manufacturers will choose to locate or develop their operations in the UK, with the possibility of tariffs in place, remains to be seen and will likely be dependent on the upcoming negotiations with Europe."
But on the upside, he said a drop in the value of sterling could make the UK a magnet for trade, and lead to reduced red tape.
He said government action would be important to help ensure the UK remains an attractive location to invest both in manufacturing and other key contributors such as science and technology.