Whichever party wins must invest in the future of British manufacturing after Brexit

Whichever party wins must invest in the future of British manufacturing after Brexit

With only a few days of campaigning before the general election, much of the focus will be on who we want to lead our country into the Brexit negotiations and how they will negotiate. But so far little attention has been paid to the equally critical question – what will our government do to prepare our economy for the challenges and opportunities Brexit will present?

The long-term success of the United Kingdom depends not only on our deal with the EU but also on how future governments support the growth and development of the economy. Whichever party forms the government after the 8th June, they will have to adopt a strategy that responds to the challenges of being outside the single market and customs union, including the potential impact of rules of origin, customs delays, tariffs and regulatory diversion.

These issues are particularly important for our manufacturing industries, which account for over 10% of UK GDP and some 55% of exports. Much of our manufacturing relies on international supply chains, with components for goods manufactured in the UK crossing borders several times, and any disruption to this can be harmful to the productivity and competitiveness of our industries. In the automotive industry almost 60% of components used for manufacturing cars in the UK are imported, with most of those imports coming from the EU.

The decision to leave the European Union brings with it opportunities to develop bespoke trade agreements around the world and a chance to design regulation targeted at the UK economy; it also brings about new challenges for business, but most importantly it makes those in government and our elected MPs ultimately accountable. It means that they must be responsible for making the most of those opportunities and finding solutions to the challenges ahead.

For key manufacturing industries, especially the UK’s highly successful automotive industry, developing and growing our competitive UK manufacturing supply chains will not only be key to attracting future investment and creating highly productive jobs in manufacturing, but it will also be one of the best ways of supporting industry in dealing with the challenges Brexit brings.

The automotive industry has been particularly successful in developing its UK based supply chains in recent years. Since 2011, the proportion of domestically sourced components used in the manufacturing of a vehicle in the UK has risen from 36% to 41%. A report, published by Civitas, highlights the successful role of government in helping to achieve such a feat, and argues that the support for the automotive industry since 2008 provides a great example of how the government should now be looking to support industry as a whole across the UK.

The challenges of Brexit brought about by having to comply with rules of origin (such as requiring 55% of a vehicle’s content to be sourced domestically, from countries in a trade agreement, in order to benefit from tariff free-trade), by the exchange rate making imports more expensive, by potential new tariffs, and by potential new regulations and customs checks, can all be helped by growing the UK-based supply chains.

The only practical and beneficial means of doing that is to invest in the UK supply chains to ensure they can grow and remain competitive. This is exactly what has been achieved in the automotive industry. When companies like Nissan, Vauxhall and BMW have spoken out about Brexit it is because they are aware of the issues and are aware of how governments can support them. The automotive industry has received significant investment from the government through the Regional Growth Fund and the Advanced Manufacturing Supply Chain Initiative. These investments have leveraged billions in private investment and have resulted in a strong and growing industry. Throughout this time the automotive industry has had the ear of government through the Automotive Council, a joint industry-government body which has encouraged business-led productive investment from government into the industry.

Now all our manufacturing industries must prepare for the challenges that Brexit will create and we know that investment in supply chains and collaboration between government and industry can provide the critical support that is needed. If the government values the highly productive manufacturing sectors in our economy, then it is essential that it acts now and invests in the future of British manufacturing.