Reviewed: 17th May 2018
With less than a year to go before Brexit, how are UK industries faring under the uncertain market conditions the referendum result introduced? Here we look at a number of key industries to find out whether our looming exit from the EU has had any effect.
Taking two key statistics from the Department for Environment, Food and Rural Affairs (Defra), it appears agriculture has fared well during 2017 and on the face of it, hasn’t been unduly affected by the Brexit referendum result:
The reality of leaving the EU, however, may mean a decline is in store for the UK’s farming industry if subsidies aren’t available at a similar level under new legislation planned by the government.
So apart from the level of farming subsidies, what other issues is the industry facing?
The removal of tariff-free access to the European markets is a significant threat to the future of our agriculture industry – in 2016, 71.4% of the food and non-alcoholic drinks that were exported by the UK went to the EU.
If access to the European workforce is restricted, it will become a major issue in the industry - seasonal workers from eastern and central Europe are heavily relied upon by fruit and vegetable growers.
Figures published by the Office for National Statistics (ONS) show construction output fell by 1% during the rolling three month period to January 2018. New work orders fell by 25% during October to December 2017, with new housing orders falling by 6.1%.
The number of new insolvencies in the construction industry also rose to 2,633 for the 12 months ending in the third quarter 2017. This represented the second highest number of insolvencies in England and Wales.
With a year to go before Brexit the construction industry appears to be struggling, with access to skilled workers also being a potential issue for this industry.
Royal Institution of Chartered Surveyors (RICS) figures show that 8% of workers in the construction industry come from the European Union. The skills crisis already being experienced in construction could, therefore, be further exacerbated if access to the European workforce is limited.
Although manufacturing has benefitted from a lowered cost of exports due to the drop in value of sterling following the Brexit referendum, the price of importing goods for production processes has offset some of the benefits, and caused a slowdown in growth in this industry.
Additionally, investment within manufacturing has slowed, partly due to the uncertain market conditions, but the protracted Brexit negotiation process may have also compounded the situation.
A survey of 382 companies by industry trade body, EEF, in conjunction with Santander, shows that average investment expenditure in the industry has dropped from 7.5% of turnover to 6.5%.
Slightly more than half of the businesses surveyed, however, stated an intention to invest more in plant and machinery in the next couple of years. Additionally, there was a drop in the number of companies that intend to reduce their investment in plant and machinery to 17.1% - an encouraging statistic, and the lowest proportion since 2014 in this respect.
As a key part of the UK economy, and one of the country’s largest industries, tourism employs 3.1 million people overall, according to figures from the Tourism Alliance.
The annual report by Anholt GFK shows that in 2017 the UK’s brand ranked third among the 50 countries surveyed, retaining the same position as in 2016. The survey also revealed that the UK is the fifth most popular destination for tourists.
In fact, inbound tourism seems to be thriving following the drop in the value of sterling. In April 2017, 3.7 million overseas residents visited the UK and spent a total of £2 billion in the process. These figures represent an increase of 19% and 20% respectively on the same month in 2016.
The discouraging predictions made after the Brexit referendum appear not to have materialised in some industries. Until we actually leave the EU, however, the general uncertainty of what is our future will continue to engender a reluctance to invest.
Hopefully, industries as a whole will be able to plan ahead carefully for worst case scenarios, such as a lack of access to the highly valued European workforce, and also to the single market. With 75 offices stretching from Inverness down to Exeter, Real Business Rescue can offer unparalleled director advice across the UK.
Regional Managing Partner