BREXIT

Brexit comment by Bryan Buchan, Chief Executive, Scottish Engineering.

At the time of writing, we are starting to feel the force of the predicted maelstrom following the Brexit vote.

From an engineering manufacturing point of view, it is difficult to see any accrued benefit.  While the export market, which comprises Europe, has grown in the number of member states involved, in percentage terms it has fallen in value from some 54% to 42% over 12 years.  Still, however, a very significant market for ourselves, and equally we constitute a substantial market for European countries, notably accounting for 7.4% of German exports and 7% of French.  We are now plunged into an even deeper trench of uncertainty than that around the previous phases post-recession, with companies struggling to foresee the future and facing intangibles in terms of investment validity and potential scenarios for extended stagnation, or indeed reversal of growth.

Chaos prevails in the UK, with internal fracturing of the two major political parties, and a new Prime Minister in Theresa May bringing associated prevarication on the invocation of Article 50 to initiate the process of exit.  It would appear that our strongest ally within the block is the ever-pragmatic German Chancellor Angela Merkel; however, she will be facing an election next year and this should be a point of concern for our principal negotiator.  It is clear that if we wish to retain full access to the EU market in the manner of Norway, that a substantial contribution to EU funding will be called for, as will almost certainly free movement of people within these boundaries.  The promises of the ‘leave’ camp in terms of NHS funding have been exposed for the flagrant lies which they were, and their proponents have now virtually all existed stage left.  Therefore, we have given away a place at the bargaining table, devalued our currency and placed our economy, particularly financial services, at risk – for what?

What has brought us to this point appears to be anger on the part of the less advantaged areas of England and Wales in particular, fuelled by concerns over immigration, globalisation and EU social policies.  There is a stark division in the country with Scotland, Northern Ireland and Greater London clearly pro-EU.

Manufacturers will look to an easing in their export conditions, with the collapse of the Pound; however, this will be offset by significantly higher raw material costs when sourced from either Europe or the US.  One shaft of light might come from the fact that oil is priced in Dollars, and the price per-barrel realised price might now put some marginal fields back into contention in the UKCS, with a concomitant beneficial effect throughout the supply chain.