Posted By Sankara Narayanan Venkataramani, July 18, 2016 at 11:45 AM, in Category: Manufacturing Leadership Council
In the weeks since the United Kingdom voted to leave the European Union, much uncertainty about the political, economic, and social implications of the decision remains. But manufacturers are pressing ahead with business as usual, adopting a “wait and watch” attitude as the smoke from the Brexit decision slowly clears to reveal what Brexit means from a manufacturing perspective.
These were the key conclusions of a special Manufacturing Leadership Council “Critical Issues” conference call and panel discussion held last week about the Brexit vote. The panelists – from Flex, LM Wind Power, and from ML Council parent Frost & Sullivan – agreed that it is still very early to try to assess the impact of the decision on manufacturing, but they also expressed concerns that the Brexit decision could trigger a number of unwelcome consequences.
“With regards to Flex, currently there is no significant change in the way in which we approach the U.K. or the E.U.,” said Council member Mike Thomas, Vice President and General Manager, at Flex. On a similar note, Siemens recently announced that the Brexit decision will not have any impact upon its U.K. operation, where 16,000 people are employed. Panelists said they hoped that other companies would adopt the same stance and employ a ‘wait and watch’ strategy to see exactly what happens.
The panelists were unanimous in the view that it is simply too early to assess the implications of the Brexit vote in a comprehensive way. Said Council member Bill Burga Jr., Senior Project Director at LM Wind Power: “From a LM Wind Power point of view, there is no official response or reaction yet. It’s a timed matter and it is going to take some time to sort out at least in terms of what we are going to do or not do.”
Nevertheless, Burga said that in addition to the political and commercial implications, there is also an emotional component to BREXIT which might persuade other countries to take the same exit route. But from a manufacturing perspective he mentioned that Denmark is currently completely distracted with its own issues. “While BREXIT is important and critical to know, it has not been in the minds of a whole lot of people over here,” Burga said. “There is no indication that the business in any way is in a pause. We, too, are in a wait and watch position right now.”
The reason companies are in a wait and watch mode is that there is uncertainty over how the exit negotiations are going to happen and how they could impact, for example, foreign investments in the U.K. However, this uncertainty, which is expected to prevail for at least a couple of years, is not healthy from a manufacturing perspective.
Muthukumar Viswanathan, Practice Director, Industrial Automation & Process Control and Measurement & Instrumentation, at Frost & Sullivan Europe, took a negative view of the period of uncertainty now before the U.K. “This uncertainty is not very good for the system and I believe that the Government or the political system needs to get on top of this quickly before this becomes a free fall,” he said.
There are several dimensions to this uncertainty, Viswanathan said. First, there is still a belief that Article 50, the E.U. rule that the U.K. needs to formally invoke to exit the Union, might never be triggered. There have also been reports that the U.K. could undertake a second referendum on Brexit. And then there is Scotland, which has voiced its own desire to separate from the UK and remain in the EU.
In addition, there is the 2016 U.S. election, and as well as elections coming in various parts of the E.U. where the emotional angle to BREXIT is expected to play quite a big role. With all these factors, there are a lot of different ways in which the future of manufacturing in the U.K. and Europe can go. Viswanathan said that politics is really going to determine the outcome of many of these factors. Every company is waiting to see how the political winds blow in the E.U., U.K. and the U.S. Once this has settled, companies will start to figure out what they need to do next.
Paul Tate, Research Director and Executive Editor with Frost & Sullivan's Manufacturing Leadership Council, and moderator for the “Critical Issues” call, said “Disruption is not just all about technologies. It can be political, too, for the manufacturing sector.”
The political uncertainty needs to end, Tate said, and the U.K. should start exit negotiations sooner. Only then will companies be able to understand what the true implications to their businesses are and decide accordingly. Trying to plan for any of them right now would be an exercise of futility.
Category: Manufacturing Leadership Council
Written by Sankara Narayanan Venkataramani
Sankara is a Senior Industry Analyst with the Manufacturing Leadership Council
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