May’s Brexit deal suffers crushing defeat: UK manufacturing responds

Yesterday evening, MPs voted by 432 votes to 202 to reject Theresa May’s Brexit deal, the biggest defeat for a government in history. UK manufacturing responds.

Hard Brexit Euro Pound Sterling Finance - Stock Image
The government now faces a vote of no confidence later today.

The Prime Minister now faces a vote of no confidence later today, where MPs will decide if they want the government to continue.

May expects to win as it is unlikely her MPs will want to vote themselves out of power. However, if she loses and no alternative government can be formed, there could be a general election within weeks.

If she wins, she has just three days to form alternative plans to put to MPs. Options include a second attempt at getting her deal accepted by Parliament, a renegotiation or another referendum.

Securing the right deal is pivotal to UK trade and economic stability, manufacturers and business leaders have repeatedly called for the government to reach a deal. In the event of a no deal Brexit, Britain would leave without a withdrawal agreement and have to begin trading with the EU on the basis of World Trade Organization (WTO) regulations.

Industry reacts

Automotive

The Society of Motor Manufacturers and Traders (SMMT) chief executive, Mike Hawes, said: “The vote against the Brexit deal on the table brings us closer to the ‘no deal’ cliff edge that would be catastrophic for the automotive industry. All sides in parliament must work together to find a way forward and put the necessary mechanisms in place to prevent this happening and explore alternatives that protect our future.”

He explained that leaving the EU, the biggest and most important trading partner with Britain, without a deal and with no transition period, “would put this sector and jobs at immediate risk.”

Money Finance Budget 2018 investment invest - image courtesy of Depositphotos
Securing the right deal is pivotal for economic stability – image courtesy of Depositphotos.

It is the collective failure of our political leaders that, with only a few weeks to go, we are staring down the barrel of no deal,” commented Stephen Martin, director-general of the Institute of Directors.

He added: “As things stand, UK law says we will leave on 29th March, with or without a withdrawal agreement, and yet MPs are behaving as though they have all the time in the world – how are businesses meant to prepare in this fog of confusion?”

Carolyn Fairbairn, CBI director-general, said: “Every business will feel no deal is hurtling closer. A new plan is needed immediately. This is now a time for our politicians to make history as leaders. All MPs need to reflect on the need for compromise and to act at speed to protect the UK’s economy.”

Chemical

The chemical and pharmaceutical industry adds £18bn in value to the UK economy every year. 63% of companies in the sector export globally, the highest proportion of any goods manufacturing sector in the UK economy. 60% of exports go to the EU and 75% of imports and raw materials come from the European Union, according to the Chemical Industries Association.

Steve Elliott, chief executive of the Chemical Industries Association, said: “There is of course general business disappointment with the current position. We continue to lack the certainty that business has called for since the day after the 2016 referendum.”

The Brexit white paper proposes to keep trade between the UK and EU “frictionless” - image courtesy of Depositphotos.
The chemical and pharmaceutical industry adds £18bn in value to the UK economy every year – image courtesy of Depositphotos.

On the impact of the vote, Elliott added: “What we can and what we have responsibility to do, is to advise of the consequences, and those consequences – in terms of contingency plans and actions – are becoming more and more critical as we get closer to our 29th March exit from the EU. Every delay risks either no decision on UK investment, trade and jobs or, worse than that, irreversible decisions.”

On next steps he said: “What we now need, and we have needed from the very start, is for MP’s of all parties to work together on behalf of the country to identify common ground and the basis of ‘plan B’ so that when the Prime Minister reports on Monday we can be confident there will be a majority view on securing a deal. The need for a negotiated deal remains and gets more urgent by the day – as does the need to avoid a ‘no deal’ outcome”.

Steel

Mark Jones, director at Ficep, a UK-based steel manufacturer told TM: “The defeat of the Prime Minister’s deal is prolonging the agony for the manufacturing industry.” He says as a business with a parent company based in Italy, “we are being asked on an almost daily basis what is happening and we’re unable to give any clear indication. Around 80% of our product supply comes from Europe so the continuing uncertainty over transport, import and export remains a concern.”

Steel plant steel foundry - image courtesy of Depositphotos.
Manufacturing leaders need to avoid a no deal – image courtesy of Depositphotos.

Supply chain

Jonathan Owens, lecturer in operations management at the University of Salford Business School, and expert in supply chains, said: “Look around your own home and see how many products you have purchased that are not made in the EU. Many government supporters of Brexit have consistently argued that failing to reach a deal wouldn’t be all bad and leaving with no deal would mean the UK could work to get a favoured nation status under WTO to trade with the rest of the world.

“However, regrettably this would not be as simple as it sounds to develop, i.e. new trading channels, routes, tariffs, supply chains etc.  For example, if we consider tariffs, Britain currently trades with twenty-four countries and territories under the sole agreement of WTO rules. However, with sixty-eight countries, it has either fully or partly in place the EU free trade agreement, that enables the UK to trade on better terms.”

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