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Paul Mitchell (MD) and Paul Hancock (Chairman) sat down with DPA magazine this month to discuss the effect that Brexit has had on Bowman International in the 12 months since the UK invoked Article 50 of the Treaty on the European Union and what their predictions are on the future trading relationship with the EU for companies like Bowman.
Read the interview in full below or click here to read the abridged interview on the Design Products and Applications magazine website.
Investment by Britain’s manufacturers has seen a reality check in response to the continued political uncertainty surrounding Brexit, according to a study by EEF and Santander.
Bowman International’s Paul Hancock (chairman and founder) and Paul Mitchell (managing director) offer some opinions about the impact of Brexit on the UK manufacturing industry.
What impact has pre-Brexit had on Bowman? And what impact, if any, do you see post-Brexit having?
PAUL MITCHELL: For Bowman the reverse is true and we have seen growth in all sectors that we operate in. Our margins have been hit however as a result of the weakened GBP against USD which impacts negatively on our purchases which are predominantly in USD. On the flip side we are able to be more competitive as we grow our sales into the Eurozone.
In Germany we have seen continuous growth but there is a fear with our customers that trade will become more complicated with the UK if a hard Brexit is realised. This does not seem to have impacted on sales to date.
PAUL HANCOCK: Since the vote to leave the EU, Bowman sales have risen by 35 percent and the forthcoming year is set to rise at least another 25/30 percent.
After Brexit we see further gains could be had if trade agreements are signed with countries such as USA, Canada, New Zealand and India as we already export to these territories.
We invested heavily last year in new plant and equipment and even more will be spent over the coming year in order to become more competitive and increase our exports further.
We see Brexit as a win-win situation!
The EU is currently Britain's biggest trade partner. Once the UK leaves, what effect will this have on the UK manufacturing industry?
PAUL MITCHELL: At this moment in time it’s difficult to see what effect Brexit will have on trade into Europe as this is so dependent on the final deal. At the end of the day businesses are very good at adapting to situations and after the politicians have finished with it both sides will still want/need to trade. The uncertainty of the outcome cannot help trade in the short term but Bowman has seen little evidence of this affecting turnover.
PAUL HANCOCK: The EU is our biggest trading partner, but it must be remembered that it comprises 26 countries. The USA is by far our biggest trading partner if you consider it is one country.
The EU has hardly grown over the last eight years whereas other larger markets have expanded much more. The EU has only 450 million people whereas the rest of the world has over 2 billion.
The world is the manufacturing industries oyster if only they get far more export minded as the UK was prior to joining the EU.
According to the UK statistics authority, UK manufacturers currently employ 300,000 EU citizens, representing about 10% of the workforce. What effect will a post-Brexit world have on our already depleted workforce? And what can businesses do to combat the problem?
PAUL MITCHELL: We will still need labour from the EU post-Brexit. The hope is that we can be more selective about who enters the UK. The uncertainty of Brexit will obviously put some people off wanting to come and work in the UK in the short term. Once the post Brexit rules are known then businesses can move to attracting workers to the UK.
PAUL HANCOCK: We think that the UK will still be attractive to EU citizens after Brexit as long as they have skills that our country requires. Much will depend on what the government negotiates on this subject.
A system comparable to the one operated by Australia needs to be introduced which only allows immigrants to come in if they have skills that are needed and if they have a job to go to.
With the UK manufacturing industry in mind, what key components do the Government need to bear in mind when negotiating to leave the EU?
PAUL MITCHELL: Obviously the most important aspect for manufacturing will be the deal on trade. Any trade restrictions or tariffs will not help UK manufacturing. This does, of course, work both ways and as the EU imports more into the UK it may not be in the interest of the EU to push this.
PAUL HANCOCK: Since the trade balance with the EU is heavily in favour of the EU, they have far more to lose than the UK. It is therefore in their interest to come to a reciprocal arrangement.
If WTO rules come into play then the duties levied by the UK on EU imports will far outweigh the duties imposed by the EU thus giving the UK government a large pot which it could distribute to UK exporters, enabling them to still deliver at the same price i.e. duties paid on exports into the EU.
Which sectors do you see being affected the most post-Brexit?
PAUL MITCHELL: I think the most at risk will be the financial sector but with regard to manufacturing it may be that investment in the UK by global companies will be put off by trade or labour restriction impacting the most. SMEs will find a way to cope with any changes which may include a shift away from EU trade.
PAUL HANCOCK: This is difficult to answer as we are only in the engineering sector.
What is really annoying is the stance being taken by the CBI which dances only to the tune of large industries. Since the SME sector is larger than the large industry sector why doesn’t the press, BBC etc. cover the SME sector in an equal way?
Paul Hancock concludes:
Since 1946 our industrial base has consistently shrunk to around 12 percent of GDP. Farming has also shrunk. Only once in all that time has it increased and that was under the Thatcher administration. Recently there have been good signs that it is on the increase again.
No one seems to highlight that after we joined the EU our engineering base shrank as we allowed other EU countries to purchase our companies and move them abroad. Maybe after Brexit they will have to move back.