Brexit | Rap Industries Ltd

How Brexit Makes British Products More Affordable

Every time there seems to be any uncertainty in Britain, we always here the same rallying call to ‘buy British’! You might be thinking it’s a broken record at this point, but this recognisable cry is not just a generic example of political rhetoric. Manufacturing was once the heartbeat of Britain, creating jobs, livelihoods and communities in its wake. Now, it’s largely outsourced around the world due to cheaper wages and higher profits. However, manufacturing still exists and the quality has not declined since Britain’s industrial heydey. Usually, you would expect to pay a premium for British goods, owing to a higher cost of living which hikes the price. Events over the past six months have begun to change that perception.

With the Brexit vote favouring a move to leave the European Union, this has caused the Sterling to slump. You may recall a similar speech being bandied around during the recession nearly 10 years ago. Essentially, when the pound slumps, this makes it more expensive for us to import. This is caused by the pound being worth considerably less when compared to a foreign currency. On the reverse, however, this makes exporting cheaper – ideal for foreign companies looking for quality goods. Even for British people, the weak pound is likely to drive up the price of everyday goods, making British alternatives more attractive.

What Have the Past 6 Months Suggested?

Voting to leave the European Union placed Britain in a unique situation, one never trodden before. The experts and the analysts filled our news feeds with the supposed doom and gloom which comes attached to leaving what had become a comfort zone. In the months since Britain has yet to implode, the economy is stable… for now and exports have increased. Rejuvenating the manufacturing industry has been on the government’s agenda for at least the last decade. Now, in the aftermath of the Brexit vote, there are shoots emerging which suggest this could become a reality.

Demand for British goods has held and even increased since Brexit. As the value of the pound came tumbling in the weeks and months later, this led to ‘Made in Britain’ being cheaper abroad. For instance, the average spending by foreign credit cards increased by 11%. Meanwhile, importing goods became more expensive, driving the price of foreign products up (the Marmite debacle is a great example of this).

However, this is not to suggest that Britain is going to transform itself into a powerhouse, such as China or India. Instead, it is utilising an educated and highly skilled workforce to create quality goods. The ‘Made in Britain’ marque which you may see adorning some products is as much an evaluation of quality as it is telling you where it is from. Goods ‘Made in China’ come attached with this stigma of cheap materials, cheap product. The opposite can be said of Britain, despite a lack of evidence to suggest the contrary.

Why is ‘Buy British’ Regarded So Highly?

The perception is that when you are buying British, you are buying quality. This all stems from brand Britain; the Industrial Revolution, the Royal Family and the British Empire. Its history is far from being covered in glory, but it creates resonance worldwide. In the east, China may struggle to shake off the image of packed factories, cheap labour and a lot of smog. Likewise, Britain is tightly associated with this identity of what it means to be ‘British’. This is not to say that goods produced in Britain are complete tat, quite the opposite. It’s a proven track record forged by Boeing, Jaguar, Rolls Royce, HP, Cadbury’s and so on. Each who forged this stock reputation, which every British manufacturer now follows.

Having an identity such as this gives the manufacturer’s something to strive towards. Products are designed and developed with the quality set as the main goal. For customers abroad, especially in developing countries, this is ideal due to high demand for quality goods. With the sterling at its weakest state in recent memory, there has never been a better time for foreign consumers to buy British.

Where Do British Consumers Stand?

Only a few weeks ago, across ‘the pond’, President Trump’s inauguration speech was centred around buying American and creating American jobs. The same theory was reverberated in the UK by Labour deputy, Tom Watson. The idea is that by supporting local manufacturers, this results in more jobs being created and more wealth being kept in Britain. Undoubtedly, as we move closer to Brexit, the government will look to shine the light on British goods to begin making up ground on its trade deficit.

In the coming years, we can expect the price of imported goods to increase. Meanwhile, after Brexit is complete, there is a good chance the cost of British goods will fall. This will primarily be caused by an independent Britain looking to reinvigorate its ‘self-sufficiency’. As inflation rises, this is likely to happen in tandem with the price of imported goods also on the rise. As a result, while British goods may not necessarily be cheaper, they will be more comparable. Significantly, this is one of the reasons why there is such a drive to ‘buy British’ as doing so will see more money being pumped into the British economy, rather than being sent abroad.

Buying British, for Britons is primarily an ideological decision. The rising cost of inflation will start to pose the question to consumers as to whether they prefer British cheese or Swiss, rather than which is cheaper. For those outside of Britain, there has never been a better time to buy British, certainly not in recent memory. While investors may have been turned away by relative instability, one-off orders are sometimes up to 10% cheaper when using the US dollar, a significant saving.

Buy British - Universal Screens — Buy British – Universal Screens

About Rap Industries

Rap Industries are a British manufacturer, based in Peterborough, Cambridgeshire. Established for over 40 years, we have designed and produced office partitions and exhibition stands for clients across the UK and the world. If you wish to find out more about the services we provide, please call 01733 394941 or send an e-mail to sales@rapind.com.

Predictions for the Future Following the Uncertainty of 2016

2017 is set to be a year of uncertainty for British manufacturing, that we can be sure of. As the first steps towards triggering article 50 are well underway, the entirety of Britain is asking, ‘what comes next’? When the country emerged from the recession at the end of 2009, then Chancellor, George Osbourne, set out his aspiration for “a Britain carried aloft by the march of the makers”. In the seven years since, while the manufacturing industry has seen steady gains, it remains inexplicably far from the future Osbourne envisioned. That vision for British manufacturers was once again blurred by the nation’s decision to vote to leave the European Union.

The result poses many questions which we may not know the answer to for at least two years, which makes preparing for today a challenge. As the value of Sterling has dropped, in an ideal world, this makes goods commonly carrying the marque, ‘made in Britain’, cheaper to export. In the days following the referendum, this is true to an extent. However, it glosses over multiple factors which also significantly impact British manufacturers. While exporting to countries abroad may be beneficial, the increased cost of importing is neglected. According to the latest press release from the Office for National Statistics, Britain is importing £38.8bn while exporting £26.1bn, creating a substantial deficit.

The State of British Manufacturing as 2017 Commences

More than six months have now passed since the referendum vote and the proverbial dust has settled, for now. While the economy took an initial hit, it has steadily been growing once again amidst increasing inflation. In terms of manufacturing, IHS Markit released the promising results of its survey, the Markit/CIPS UK Manufacturing PMI. Surveys with over 600 companies revealed increased demand from the US, Europe, China, Middle East, India and other Asian markets. In the three months following the referendum, their results revealed a drop in factory output, however in the months since that output has grown to above average levels.

So, the demand is there, which is good news for British manufacturers at the time of writing. While the Sterling remains relatively weak, it’s a great time for exporters to begin reaching out to more foreign clients. This does, however, raise a question for domestic manufacturers. Generally, during periods of economic uncertainty, consumer spending tends to fall, leading to decreased sales and lower factory output. Early reports suggest that this is yet to happen, although British manufacturers should be prepared in the event that it does curtail in the months and years to come.

Provisions for British Manufacturers

Foreseeing what will happen in 2017 is tough to predict at this moment. What we do know is that the infamous, ‘article 50’ is likely to be triggered next month, in March. Theoretically, that should mean Britain will have left the European Union by April 2019. However, many speculate this process could take even longer. Once this is triggered, Britain can begin to negotiate its exit, although any trade deal is unlikely to be completed on the same time scale. To put things simply, the whole break-up process will be extremely complex. Therefore, it is necessary for British manufacturers to begin to prepare for a range of different scenarios rather than gambling on one.

One element to consider is the impact which immigration can have on factory workers. Early reports suggest that migrants from the EU currently in Britain will be allowed to stay following Brexit. However, the ‘flood of immigrants’ is likely to become more like a trickle as European workers look to make the most of the EU’s free movement of labour. Furthermore, as we discussed earlier, the cost of importing components from abroad has already and could potentially continue to increase. In order to accommodate this, British manufacturers may have to look at renegotiating their deal, looking for an alternative or find a domestic supplier.

Theoretically, the drive towards leaving the EU suggests that looking at domestic options could yield success in the future. In the labour market, employees are likely to come from a local background, opening the debate over apprenticeships once again. As Britain drives to become more self-reliant, its manufacturers who should look at home to find manpower and resources. The aim then would be to target the ‘global marketplace’, which should become more accessible once Britain’s exit from the EU is complete.

What Can We Hope for from 2017?

For now, British manufacturing is on the up. Factory output has been increasing, which is primarily driven by a growth in exports. Meanwhile, the uncertainty which caused consumer confidence to tremble appears to have settled for now. Once article 50 is triggered, nothing significant immediately changes, however, the markets and Sterling may take a hit as Britain commits to leaving the European Union. All the rhetoric coming from Westminster is talking about accessing ‘global marketplaces’ and the weak state of the Sterling means that there has never been a better opportunity to export in recent years.

Finding ways in which to access new markets is where challenges begin to arise. The British Chambers of Commerce is a great place to start if you are looking for advice for reaching out to certain regions. Meanwhile, for smaller businesses, a website is the ideal tool to reach out to customers abroad. This can be a challenge, however, it can provide a cheaper route than more traditional methods of exporting. If required, you could even hire a freelancer to localise your site in another language if there is a specific market you are looking to target.

Rap Industries are a UK-based manufacturer of office furniture and exhibition stands. Established over 40 years’ ago, Rap Industries creates bespoke office screens, acoustic pods, room dividers and exhibition stands for clients. For further information, please call 01733 394941 or send an e-mail to sales@rapind.com.

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