From manufacturing to financial services, the UK’s decision to leave the European Union is likely to impact industries, markets, supply chains and workforces. Uncertainty over Brexit is currently the largest driver of scepticism but, with the deadline for exiting the EU looming, which sectors are most likely to be impacted?
Financial Services
Although many analysts focus on the potential negative impacts of Brexit, there are several sectors that are not afraid of the decision, including the financial services sector, which employs over two million people and is the UK’s largest taxpayer.
The row over passports for EU citizens has caused a great degree of uncertainty for banks deciding whether to stay in London or move elsewhere, but a recent Reuters report has allayed many fears, outlining the fact that “the EU is unlikely to turn off the tap to UK financial services after 2020 as it needs to build up its own capital market after decades of City dominance.”
Additionally, the increased market volatility caused by Brexit has created many trading opportunities for individuals investing in financial markets. This has led to the formation of social trading communities, where traders have become plugged into social groups and access information from multiple networks, as well as other traders themselves.
Food and Drink
Another industry confounding expectations is the food and drink industry. Although immediately following the vote many market analysts focused on the potential downsides of Brexit for the market, the prospect of new trade routes has led to several competitive advantages.
Along with the US and China, Prime Minister Theresa May has also met with Australia, Chile, Canada, Japan and other emerging markets to discuss the possibility of new trade deals.
Although these trade deals cannot be drawn up until the UK has withdrawn from the EU, they would be crucial in opening up new markets for UK food and drinks companies to sell products in. Should the UK undergo a ‘soft Brexit’, then it would allow the UK to maintain a bilateral trade agreement with the EU, without any tariffs or border controls.
Agriculture
Image: Pixabay
Two-thirds of the UK’s farm income rely on direct payment support. As a result, many farmers want to keep tariff-free access to their largest export market. However, whether this is possible remains increasingly unclear.
Market access is not the only worry for the UK’s agricultural industry, and there are also worries about the labour market. Vegetable and fruit-picking is usually carried out by seasonal workers, with most of the 80,000 workers coming from the European Union - mainly Romania and Bulgaria.
It’s not all negative for the agricultural sector, however. Although farmers rely on the Common Agricultural Policy for 55 per cent of their income, the UK government has confirmed that they will make up lost CAP subsidies until 2020 at least.
Automotive Industry
Of the 1.6 million cars manufactured in the UK each year, 77% are exported abroad, of which 58% are sent to EU countries.
The automotive industry accounts for 13% of Britain’s exports and is worth an estimated £82 billion. However, it remains reliant on integrated supply chains, which may be lost when the UK finally leaves the EU. Any imposed tariffs would be a threat to the industry, as would any supply chain delays created by a disorderly exit.
e-commerce
The UK is the largest e-commerce market in Europe and is an unmitigated success story. Although there are fears over taxes and customs for EU-based sellers post-Brexit, the market remains bullish, with orders from UK retailers possibly increasing post-Brexit due to the drop of the pound against other currencies.
However, the sector will want to avoid the imposition of tariffs in a ‘hard Brexit’ scenario at all costs, as this would lead to lengthy parcel delivery delays and additional product conformity procedures, which would both act as barriers to trade.
Image: Pexels
Looking to the future, it is clear that the situation is highly complex and ever evolving. Much of the impact of Brexit on the aforementioned industries is likely to be determined by the type of Brexit the UK undergoes. While a disorderly ‘no deal’ Brexit may cause a great deal of upheaval, a ‘soft Brexit’ may allow all necessary trade deals and tariff discussions to conclude, allowing the UK to open its trade borders and allay many of the fears outlined.
The upcoming European Parliamentary elections may give us a better understanding of the type of Brexit deal the UK government will look for, but with Theresa May promising to step down in the near future, there is much that could change in the short term, and businesses are primed for further uncertainty.
