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With Brexit just around the corner and a possible trade war on the horizon, the economy looks like it may be in for a bit of a rough ride over the next few years. Whilst some are claiming the end of manufacturing and others claiming prosperity for Britain what is at risk exactly?
CBI president Paul Drechsler has warned that the UK’s motor industry faces extinction if the UK leaves the EU and said the car industry in particular would suffer without “real frictionless trade” post-Brexit.
Jaguar Land Rover have announced cutting 1,000 UK jobs due to the uncertainty surrounding Brexit as well as revealing plans to move production of the Land Rover Discovery to Slovakia.
It also appears that EU car makers have already begun talks about rejecting British made parts as they would unbalance the EU rules that at least 55% of a products components must come from within the union to benefit from their global free trade deals.
As the sector is still recovering from the 2016 steel crisis caused by oversupply and lack of demand, America has announced a 25% tax on steel and a 10% tax on aluminium from the EU, Mexico and Canada. Considering 7% of our steel exports go to the US, UK steel producers are going to be hit hard.
The new tariffs will make steel and aluminium from the UK more expensive in the US which will more than likely reduce demand, the knock-on effect could potentially affect thousands of jobs.
This will be further compounded by the possibility of the surplus Chinese steel making its way into EU markets. This is problematic as China has been blamed for the global over-supply of steel in the first place and because the EU is a free & open market, it likely to end up here, further damaging the economy.
The aerospace industry accounts for around 7% of the UK’s manufacturing output. A recent House of Commons report has claimed that divergence from EU rules and no free trade deal would be "utterly self-defeating" for the aerospace industry. ADS Group, a trade organization representing the UK's aerospace and defence industry, submitted that additional checks at the EU border could cost the industry £1.5 billion each year.
Add to that the fact that suppliers in European aerospace supply chains compete in large part on speed as well as cost and therefore, unless the UK can find something as close to a frictionless trade deal as possible, could severely damage the aerospace industry.
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