Manufacturers must now get a ‘pro-business’ Brexit

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Last week’s General Election outcome has prompted a backlash from manufacturing businesses and calls for the government to re-think its Brexit strategy, says Caroline Milton.

With businesses already riding a wave of uncertainty, should they really expect the tone of negotiations to shift in their favour? The engineering industry body, the EEF, is the latest group to call for the government to rethink its Brexit plans; to ensure that continued access to the single market and staying in the customs union are at the heart of negotiations.

With what is being described as ‘almost a year lost’ due to political turbulence, unsurprisingly many SME manufacturers are already considering their options with plans to shift or acquire operations in Europe Businesses need continuity in order to maintain a long-term view and retain some degree of certainty over their investment plans. If they can’t get this here, they will go elsewhere.  And of course, any shift overseas will be detrimental to the UK economy.

“the government must listen and take action or face a potential exodus of both business and talent”

With SMEs, particularly those in the manufacturing sector, heralded for their contributions to the UK economy, the government must listen and take action or face a potential exodus of both business and talent.

As Brexit negotiations get underway, the government has an obligation to secure the best possible deal for the sector. Instead of pursuing a hard Brexit based on strict border controls and plans to exit the single market, it is hoped that a softer outcome might be possible. Whilst corporation tax cuts and other reliefs and incentives have helped to bring OEMs to Britain to innovate, all this good work could be undone if the Government pursues a hard Brexit regardless. A certain degree of transparency is also needed to restore industry trust and while we understand the importance of not declaring its hand, the Government should be prepared to back certain guiding principles including securing the best possible trade deal; attracting inward investment and encouraging investment in training and skills development.

Having recently participated in a number of industry working groups, it is apparent that many businesses share the same concerns about Brexit. These include firstly, – having access to the single market with a zero or  low-tariff trade deal and secondly, maintaining access to skilled EU workers.  The need for more incentives for relevant training and education in order to up-skill the domestic workforce is also considered important.

As highlighted in the government’s Industrial Strategy earlier in the year, the references to developing STEM skills must remain high on the agenda. According to the Science and Technology Committee, the digital skills gap is already costing the economy £63 billion a year in lost GDP and narrowing the gap will require sustained investment in STEM initiatives, with a particular focus on engineering, manufacturing and construction. The time has come for the Government to demonstrate its commitment to this agenda by allocating funding and coming up with new ways to incentivise STEM skills attainment and to avoid a similar brain drain seen in the 1950s where scientists and other skilled workers emigrated to the US.

“Developing STEM skills must remain high on the agenda”

Creating a more favourable fiscal and administrative environment for SME manufacturers will go some way to keep businesses on UK soil. An increase to capital allowance incentives, a relaxation in the patent box rules and removal of the State Aid cap would also help to offset the impact of increased import costs caused by the lower value of the pound.

Whilst the snap election has undoubtedly brought more uncertainty, there is at least an opportunity for the government to soften its approach and bring home a deal which is better for manufacturers and better for Britain.

Caroline Milton, partner and head of manufacturing at accountancy firm Menzies LLP.

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