Will Brexit or remaining in the EU Make UK Manufacturing More Competitive in World Markets?

Image credit:starline/freepik.com

As we approach the 29th March deadline (a month away at the time of writing but already past when this article is published) everyone seems to have differing views.

Remainers and Leavers obviously believe in a different set of outcomes. Some from each side may well have changed sides, the leavers; because more information about the problems has come to light than was known at the time of the referendum and some remainers may have changed their views due to the inflexibility and intransigence of many of the EU negotiators. However you voted, and whatever opinion you currently hold, it is hard to see that anyone in the UK can be proud of the way our politicians have handled negotiations about our exit from the EU. The apparent lack of negotiation and perpetual dithering, not to mention the political infighting, from our politicians since Article 50 was triggered, has shamed us all and made us the laughing stock of Europe, if not beyond. I feel sure that neither remainers nor leavers voted for such a disgraceful shambles, on the part of our so-called negotiating team.

One-Sided Disgrace

To agree to a £39b divorce fee without even a reciprocal trade deal or agreement that EU citizens, who have made their homes here can stay, is pathetic. A reciprocal free trade deal, which actually helps the EU more than it helps the UK, would have made the Irish Backstop (which has proven such a sticking point) largely unnecessary.

For the UK to even consider asking for a delay beyond the 29th March, when we have already had plenty of time to negotiate since Article 50 was triggered, further weakens our position.

Whatever the outcome: Stay In; Leave without a deal; leave with a so-called deal that leaves the EU holding the Aces; Delay and eventually leave with a professionally negotiated agreement, crafted by some credible and experienced negotiators on the UK side: still leaves the UK manufacturers facing huge challenges ahead.

Theresa May, on the other hand, has shown tremendous courage in trying so hard to rescue some sort of a deal from the mess that preceded her efforts, only to be met with a lack of due consideration, humiliation and hostility from the EU mainland team, followed by constant criticism, derision and resignations from her own team, who failed her so miserably during the earlier negotiating opportunities.

Negativity from those who should know better

The UK position is certainly not helped by frequent negative prophecies and dire warnings from the Bank of England Governor, Mark Carney; James Dyson (a hitherto ardent and outspoken brexiteer) choosing Singapore to set up his new factory; Jaguar Land Rover announcing 4,500 redundancies in the UK, following the opening of a new manufacturing site in Slovakia where it is creating 3000 new jobs; Ford threatening to announce 14,000 redundancies by pulling its manufacturing out of the UK (even though, as recently as last May, Ford said that it was committed to staying in Britain): most of whom blame Brexit at least in part.

It would be much more useful and honest if all these dissenting voices told us the truth. It is convenient for Jaguar Land Rover to blame Brexit and the drop in Diesel car sales, but the second of these excuses is irrelevant as the diesel sales problem applies equally wherever the cars are manufactured, and the first is merely an excuse in a weak effort to muddy the waters.

We Are Not That Dumb

Many of us, with even minimal research, are not so easily fooled and will have already discovered that the real reason to set up in Slovakia is that their minimum labour rate is circa £2.50 per hour against nearly £8.00 within the UK. In addition, Slovakia is a net recipient from the EU of nearly 2billion Euros per year. Not surprising that the Slovakian government gave JLR a grant of 125m Euros to set up there.

Whilst the above might seem like a rant, it perhaps should be taken as a ‘wake up call’ for many UK manufacturers; faced with increasing raw material costs, huge labour rate differences (6 EU countries have no minimum wage legislation at all and Bulgaria has the lowest at circa £1.50 per hour), increased pension contributions, coupled with, for many, years of under-investment.

Apparently the JLR factory in Nitra, Slovakia has been designed and built with state of the art equipment so not only do they enjoy some of the lowest labour rates in the EU but, due to the investment in factory layout and equipment, they should be able to make cars far less expensively than within the UK. This situation was created whilst we are still fully paid up members of the EU, so what protection has EU membership afforded the JLR workforce in Birmingham or that of many other U K companies who have also set up factories where they can employ cheaper labour.

A Strong Argument for Lean Now

It is easy to believe that we still have plenty of time, within the food industry, as the engineering industry is usually several years ahead, but from what I see, we can’t afford to’ wait and see’. The UK food industry, especially in the production of many staple goods, already works on tiny net profit margins and is often very labour intensive.

Our poor productivity and wastage levels are unsustainable, with or without the EU. We can’t keep putting off investments in Lean but must act now. We already have an enviable reputation for the quality of our food and drink manufacturing, but we now need to sustain that whilst radically increasing efficiency and driving out wastage wherever we find it.

Some UK companies are already taking Lean very seriously, but many are not and are therefore in imminent danger of facing more and more competition from low wage economies, even with the EU.

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