Small manufacturer Farrat, located on the outskirts of Manchester, is ramping up investment in Germany to make up for the increased customs delays and bureaucracy brought on by Britain’s exit from the European Union.
The manufacturer of anti-vibration components for buildings and machines is expanding quickly, nearly tripling its staff in the English city over the past five years, but it claims Brexit is proving to be a challenge.
Oliver Farrell, a chief executive, said that in order to reduce trade friction, “we are now channeling a lot of investment into setting up production facilities in Germany.” The current expansion of our company is considerably hampered by Brexit.
The corporation is not alone, according to a dozen discussions held with business leaders, industry associations, and politicians throughout England in 2023.
Similar stories are told by economic data. German data reveal that British companies launched 170 FDE projects in the largest economy in Europe last year as businesses looked to enter the bloc’s single market.
That is a vast improvement over the 50 enquiries from British businesses that German Trade & Invest noted in 2015, the year before the Brexit referendum, rather than projects committed.
The Dutch government next door reported that over 300 “Brexit companies” — British businesses it believes are attempting to avoid trade friction — had relocated their activities there since 2016.
In contrast, business investment in Britain in early 2023 was roughly 1% higher than it was at the time of the referendum in June 2016, a reading that some economists attributed to unpredictability regarding trade relations with the EU.
According to figures from the Organization for Economic Co-operation and Development, company investment increased by 25% in France, 21% in the United States, and 7% in Germany during the same time period.
The numbers, according to pro-Brexit economists, disregard the fact that British corporate investment soared in the years prior to mid-2016 and was destined to slow. But according to business surveys, Brexit is to blame for the decline in investment over the past few years.
DROPPED CHANCES
Business leaders in and around Manchester, in the north-west of England, frequently talk about chances lost as a result of Brexit, according to the city’s mayor, Andy Burnham.
Burnham, a member of the opposition Labor Party who supported Britain’s continued membership in the EU, said that “barely anyone has anything positive to say.” “In most cases, it’s added a layer of complexity to them that they didn’t have before.”
The third-largest city in Britain after London and Birmingham, according to Burnham, is still very dependent on the EU market.
According to government estimates, Greater Manchester exported 61% of its commodities to the EU in 2019, compared to 42% for London and the south-east of England.
Burnham said that Manchester had a successful track record of luring foreign trade and investment, but just like at Farrat, local businesses felt that stronger trade links would have improved that track record.
While some Manchester-based businesses are spending money on offices and production facilities outside the EU to avoid trade disruptions, others claim they have little choice but to share new business with organizations that are better equipped to operate within the bloc.
A significant European business has been developed by Creative Concern, an advertising and marketing firm with over 20 employees, during the past 20 years by leveraging the use of English as a common language on the continent.
It was business as usual in the years immediately following the Brexit decision, according to founder and director Steve Connor, until new trade rules with the EU took effect in January 2021.
Now that some competitors from other non-EU nations are able to bid directly for projects involving the European Commission, Creative Concern is forced to share projects that it used to bid for independently with companies headquartered in the EU.
Connor stated, “We find ourselves more disadvantaged than other non-EU countries, which are putting salt in the wound, since our government, in its infinite wisdom, has chosen to pursue a hard Brexit.
The British government claims that relations with the EU are improving and cites the signing of a financial services trade agreement last month, which Finance Minister Jeremy Hunt called a “turning point” in communication with the group.
People are jittery.
The issue of trade friction with the EU, according to economists and business organizations, has been made worse by a lack of a long-term fiscal policy in Britain, as repeated short-tax incentives conflict with the typical seven-year investment cycle for manufacturers, according to trade group Make UK.
British businesses are also eager to learn how, or even if, London plans to counteract the massive green energy and technology subsidies being offered by the US and EU.
The British government stated that it has a lofty goal of achieving net zero emissions by 2050 and that it thinks free markets, as opposed to subsidies, are the best method to do so.
According to Farrell, the consequences of Brexit are subtle at Farrat and go beyond investment decisions. He described a sense of discomfort among prospective foreign clients towards British enterprises that have been worn down by years of political unrest.
Everyone is tense. We’re going to customers who are saying, “Great, this is a good technical proposal, but hmm, we’re going to have to get British guys on it,” he added.
The midlands town of Warwick, 85 miles (137 km) south of Manchester, is home to 3P Innovation, another factory that is expanding quickly. This anxiety has already impacted 3P Innovation.
It produces automation equipment used in the healthcare and food industries. This machinery is frequently linked with isolator units, which are housings for sterile production, constructed by specialized companies.
Founder Dave Seaward claimed that 3P lost out on an EU contract because the client thought it was too hazardous to bring the isolator unit to Britain to pair with 3P’s gear before returning to the EU – due to the possibility of customs checks and delays.
Seaward declined to name the client in issue, only saying, “So that was a contract that we know we lost just because we’re no longer in the EU.”
Less bother
In order for 3P Innovations to survive, according to Seaward, easy access to the EU’s CE certification system is essential. This is because EU clients, as well as American and Japanese clients who desire CE-certified equipment, insist that products meet certain safety, health, and environmental standards.
While the business figured out how to access the CE program outside the EU, he claimed that there were difficult months. In the end, a branch was established in the Netherlands.
According to research by the UK in a Changing Europe, a think tank, which looked at smaller manufacturers in the West Midlands, there have also been few signs that businesses are moving manufacturing back to Britain in the wake of Brexit, though some are considering it.
But, similar to Farrat and 3P Innovation, it was discovered that several businesses had started or increased their activities in the EU.
“EU clients desire less trouble. They do not consider the UK to be a dependable provider, according to Subrah Krishnan Harihara, head of research at the Greater Manchester Chambers of Commerce (GMCC).
In the long run, he said, “fewer businesses will be eager to take advantage of the opportunities for international trade.”
