What Does the Industry Think About the Brexit? “Not the Decision our Sector Wanted” – What the Industry Thinks About the Brexit
The fact that a majority of Britain’s voters opted on leaving the European Union comes as a shock to industry experts, who speculated on a thin victory of the ‘remain’ fraction. Did we underestimate the referendum? And what impacts will the decision have on companies and markets? We gathered the perspectives of Europe’s industry on the matter…
Britain wants out: 51.9 percent of votes (representing 17.4 million UK citizens) opted on leaving the European Union. While the trade relationship of an independent Great Britain with the EU still have to be negotiated, one thing is for sure: The impacts will be severe. Market analysts predicted that the turnover of British companies would contract by at least -1% per year, compared to a previously predicted growth of +4%.
As one of the most export oriented branches in the UK, chemicals and pharmaceuticals might be hit hardest, analyst agree. These industries, which are already in tight competition with low-cost producers from Asia and cheap gas-based manufacturing in the US could see exports dropping by a whopping £7 billion overnight (as a comparison: the other most export oriented industries, namely machinery and equipment and the automotive would loose between £ 3 and 3,5 billion).
“It is not the decision that our sector wanted,” said Steve Elliott, Chief Executive of the Chemical Industries Association which represents chemical and pharmaceutical businesses across the UK.
“This morning I am calling on the Government to work hard on securing the best exit plan for the UK and then establishing the new trading arrangements. Whilst we need to progress both these negotiations as soon as we can to limit uncertainty, we also need an immediate period of calm reflection to minimise instability.”
“If You Play with Fire...”
Other industry players are more vocal about with their opinion: “If you play with flames, you shouldn’t be surprised if your house catches fire”, stated Utz Tillmann, CEO of Germany Chemical Industries Association VCI. Germany is one of the UK’s most important trade partners for chemicals and pharmaceuticals, accounting for 12.9 percent of chemical imports and exports worth 5.6 billion Euros, most of which from pharmaceuticals or petrochemicals.
Now Tillman expects exports as well as direct investments to falter in the wake of the referendum. The stock of direct investments of German chemical players on the island totals roughly 1.6 billion euros. British investors have in turn invested well over 2 billion Euros in the German chemical industry.
“Especially now, at a time of timid economy recovery in Europe, leaving the European Union is a negative signal for the further economic development. Less economic growth in the EU Member States and weaker export business will be the consequences”, underlined VCI President Marijn Dekkers. “After the differences about the refugee policy, the referendum in Great Britain is the second setback this year for the historic project of European unification. We all need a Europe which is politicially unified and economically strong.”