Brexit concerns top of mind for US manufacturers

Posted on 11 Jan 2017 by Jonny Williamson

More than a third (39.4%) of US businesses with a base in the UK said they are considering moving it to elsewhere in the EU because of Brexit, according to a new report by international law firm, Gowling WLG.

The report also found that more than half (53.7%) of US businesses that export to the EU claim they are more likely to bypass the UK in order to do business with the rest of the EU as a result of the Brexit vote.

The study, which looked at the impact of Brexit on transatlantic trade, showed how the uncertainties surrounding Brexit, in particular the delay caused by issues such as Article 50, are threatening trading links between the UK and the US.

Brexit deal or no deal: The implications of Brexit on transatlantic trade - Gowling WLG.
Brexit deal or no deal: The implications of Brexit on transatlantic trade – courtesy of Gowling WLG.

A third of US businesses that export to Europe believed a delay of two years for Britain to leave the EU will have a negative impact on their business, with some striking variations between industry sectors. The automotive sector is particularly negative in its outlook, with 45% of business believing that a delay would be bad for business. However, by contrast, half of healthcare products businesses believed the delay would have a more positive outcome, possibly because the UK has such a strong reputation as a world-leading healthcare provider.

And the UK domestic market alone may not be sufficiently attractive to retain the current level of trading links between the US and the UK post-Brexit. Only a third (33%) of US businesses said that the size, composition and preferences of the UK market would encourage them to continue trading with the UK – possibly because many US businesses use the UK as a gateway to the wider EU market.

But the findings are not all bad and Donald Trump might be an unlikely hope for the UK. More than four in five (81.8%) of US companies favoured a direct trade arrangement with the UK, mirroring the President-elect’s preference for direct deals between countries.

Head of EU, Trade and Competition at Gowling WLG Brexit Unit, Bernardine Adkins explained: “The strong UK-US trade relationship that has been carefully nurtured over the past fifty years is in serious jeopardy. This is despite a wide consensus amongst US firms that the unique dynamics of the UK market and its access to the rest of the EU drive their preference for doing business here. Concerns that Brexit will have an effect on current investment decisions mean this needs addressing now, not later.

“Without its own privileged relationship with the EU, there is a higher chance that US investment will continue to see the UK as an attractive gateway to the EU’s Single Market if the UK can retain important elements of its current access. The possible collapse of TTIP could therefore present an opportunity for the US and the UK to conclude a strong bi-lateral agreement that could facilitate US investment into the UK which may continue to have free access to the EU market.”

Additionally, US businesses were split in how they currently view trade and investment within the UK, with as many businesses saying the current uncertainty over the future regulatory environment is having a positive effect (37.5%) as saying it is having a negative effect (35.3%).

Adkins  commented: “A flexible approach to trading with both the EU, as well as the US must lead all future negotiations to ensure that businesses can act with the agility needed to meet the requirements of any new agreement that comes into force. By making knee-jerk reactions at a time when there is still so much uncertainty about timeframes, businesses on both sides of the pond could risk being left out in the cold when a new agreement comes into force.”