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The post referendum impact

I’m not an expert on politics, a fact proven by my complete inability to predict our ‘majority’ advocacy of Brexit, a baffling campaign leading to a result where no proponent of either view managed to come away with too much of their dignity intact. I am also not an expert on economics. However, I’ve read enough on the subject to be further confused by the myriad of views by the so called experts.
 
We’ve had some quite confusing data and a lot of heckling to decide when Article 50 should be invoked and how long the negotiation process will take. This will of course determine the impact of our decision to divorce ourselves from the European Union and I can understand the Europeans stance that we do not deserve to have former rights or benefits re-instated after taking the decision to Brexit.
 
The uncertainty whilst Brexit conditions are being negotiated with the risk of taxes and levies applied to our manufactured goods, threatens our competitiveness in some markets. We don’t know if the opening of new markets counters this threat but what we can be certain of is the impact that Brexit has already had on our economy.
 
As it stands, the pound is approximately 20% weaker against the dollar since the EU referendum and the euro has similarly benefited versus the pound. This has meant that the Europeans are able to benefit when buying UK manufactured products and enjoy cheaper UK holidays because of the relative strength of their currencies. 
 

Effect on the industry

 
Exports have risen sharply in the last couple of months and the PMI for the manufacturing sector (Purchasing Managers’ Index – a measure of confidence in the sector) has been lifted by an unprecedented amount in its 20 year reporting cycle.
 
The engineering and manufacturing recruitment business that I run for PageGroup in the UK covers 10 locations and recruits across all levels, and all sectors pertaining to the professional engineering and manufacturing technical markets. What we are witnessing is a reasonable calibrator of the UK recruitment trend, increased confidence levels in the sector and a strong surge in job flow. August and September have been our biggest months for new jobs in 2016 so far but irrespective of the volume, it has been the speed to hire that has surprised me, especially for more senior roles. There’s a marked difference in the market now compared to the beginning of the year. What does this suggest? Strategic decisions are being made and there is some confidence in the outlook for the sector. It also suggests that there may have been some hesitation prior to the EU referendum as businesses tried to predict what the Brexit decision would mean to them.
 

Inflation fears

 
The Marmite brand has managed to divide more than just consumers after Unilever’s price row with Tesco has made it synonymous with consumer goods inflation fears. It is feared that inflation may rise sharply as the cost of imports rise, and where overseas products contribute to our UK manufactured products, we may also see production costs rise. 
 

Summary

 
Regardless of the prospect of rises we don’t need to have sleepless nights. The introduction of government subsidies to support certain sectors and more progressive trading relationships with economies outside of Europe could bolster investment and business. The experts have been hugely divided but what I am certain of is that the forecasters of doom and gloom have yet to witness their prophecies being proven correct post the EU referendum. But as I said at the outset, I am not an expert on politics or economics and I don’t know what will happen next. All I know is that for now, we should be making the most of our opportunities whilst the pound is low.
 
If you would like to discuss career opportunities within engineering and manufacturing then please contact Jonathan Abell.
 
Jonathan Abell – Managing Director, Engineering & Manufacturing.
 
T: +44 121 230 9384
M: +447884492618