Brexit and business
Thursday 30 March 2017
DR MUHAMMAD Amjad, lecturer in strategy at the University of Salford Business School gives his take on the triggering of Article 50 and what Brexit might mean.
Generally, Brexit means greater autonomy in terms of migrant movement and business policy. However, the UK will become less attractive as a destination for foreign businesses and European staff working in different sectors, especially banking, higher education.
Another important concern, unless there is a clear resolution and agreement as part of Brexit, is that of sustainable growth of research and technology development. Research funding will have to go through more hoops for cross EU collaborations in the areas of medicine, business, and technology research. Similarly, bounce back of pound sterling remains doubtful especially in the next three years as inflation will continue to rise for much of consumables. Much of the EU funding for regional and trade development is likely to slowdown in the face of Brexit. It seems 2018-2021 period is likely to be a roller coaster with limited clarity and economic challenges. However, the British people are resilient so they will respond with spending rationalization and be more accepting of foreign, cheaper alternates.
Workforce
The average businesses may loose some of the cheaper labor as currently there is much uncertainty for the potential Brexit deals. Especially important is the massive student and staff cohorts that come from the EU and bring substantial revenue and workforce benefits.
The retail and accommodation businesses are likely to be more affected in areas surrounding universities in Greater Manchester. There is a silver lining as well as some of the sectors will then rely more on British or home talent, especially in building services and local health services.The overall economy in the Greater Manchester is likely to loose £320m over Brexit according to Manchester City Council.
The massive construction projects around the Greater Manchester area are likely to attract buyers from non EU countries.
Exporting/importing
For the exporting firms - cost of exports is likely to increase and scope will become narrower as there will be no one market access. Some countries will be more cost effective to export than others.
These firms will also have to negotiate with the government team to achieve industry and country specific deals. However, it will make role of business associations more prominent in influencing government policies. Similarly, initially the lower cost of export will work favourably due to declining pound value but in the longer run currency appreciation is likely to increase the export prices.
Increasingly, British firms will look at selective market approach of doing business in few, attractive European markets and expand in beyond the EU markets. This is likely to be more challenging for smaller and medium size businesses. The exporters will have to diversify their product portfolios to cater to the diverse market needs beyond the EU. It should be seen as a challenging opportunity, but an opportunity none the less!
For the importing firms - The issues are more complex and will depend on the volumes and industry. For example vegetable and fruit importers are already facing challenges to keep prices down due to depreciated pound. Also, some businesses will have to inevitably look beyond the EU and explore more linkages with businesses in Turkey, China, Brazil.
What do you think will happen?
In the longer run, it will enable more Britain specific policies and utilization of existing British workforce. Similarly, inflation is likely to continue the upward trend and banking, retail and health services sectors will loose some EU employees. It's almost inevitable.
The UK government should adopt a clearer line on key policy matters linked to trade and healthcare sectors, and migration/ visas issues for the EU workforce already in the UK. The government also needs to put in place policies to reassure the current and potential EU students of the impact on university fees, healthcare costs, and post-study employment opportunities in the UK.
The positives can be gained from customized policy making, tailored and country specific trade and travel deals with some major EU economies, and focusing on retaining the best talent, EU as well as international.
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Sam Wood
0161 295 5361
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