According to a new economic model, British manufacturing exports could be cut by almost a third; this will leave heavily-industrial areas such as Sunderland, County Durham and Derby suffering as a consequence.
The manufacturing sector saw poor growth at the start of the year, which followed on from equally disappointing figures in December. This is a negative turn for the industry which previously enjoyed a rare economic success in light of the decision to leave the EU back in June 2016 because the weak value of the pound encouraged an increase in international business. As the pound recovers, it is likely that the business gained from overseas buyers looking for a bargain will dwindle, but the side-effects of negotiation deals on exporting trade could be challenging for most in the industry.
Manufacturing only accounts for 10% of the UK economy, but its influence in the UK trading is far more substantial. Manufacturing currently accounts for 44% of UK exports and 57% of import, of which 47% of UK exports and 55% of imported goods are traded with the EU.
Research highlights that several manufacturing industries will find the aftermath of the triggering of Article 50 difficult, including car-making companies who will struggle to access markets. Estimated cuts to manufacturing exports come in at 13%, whilst reductions in the total output at around 3.6%.
Understandably, the business community is looking toward the government for a clear conclusion. However, the government is still trying to figure out how to find “frictionless” ways to reduce the impact of leaving the single market and customs union, whilst simultaneously arranging new international deals to fall back on.
The manufacturing sector has also been severely bruised by shortages in raw materials and commodities, which sees rising costs and disruptions in the supply chain.
Experts from the University of Sussex have expanded on the estimates which were previously leaked by the Treasury by providing predictions of the what the impacts will have on the 122 manufacturing sectors present in the UK. The report indicates that even if the government can receive a free trade agreement (FTA) with other countries, the outcome would still be a decrease in exports of 34%.
In conclusion, Prof Alasdair Smith said: “Even achievement of the (literally) incredible objective of signing FTAs with every non-EU country would not compensate for the loss of the relationship with the EU.
“High, medium-high and medium R&D intensive sectors all seem likely to suffer more from the effects of Brexit. This is an important result since the UK government’s industrial strategy seeks to promote high-tech sectors: Brexit might make it harder to achieve this objective.”
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