Brexit offers glimpse of great unknown for UK ag manufacturing

Brexit offers glimpse of great unknown for UK ag manufacturing


Machinery
JCB's general manager, agriculture, John Smith said the Brexit vote had created a great deal of uncertainty but would also offer much opportunity for the company.

JCB's general manager, agriculture, John Smith said the Brexit vote had created a great deal of uncertainty but would also offer much opportunity for the company.

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With the UK’s Brexit vote done and dusted there is no limit to the uncertainty of what lies ahead.

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With the UK’s Brexit vote done and dusted and moves in play by the government to enact the Article 50 exit clause next March, there is no limit to the uncertainty of what lies ahead.

In the UK agricultural sector - currently subsidised to the tune of about 3.1 billion Euro by the EU, that uncertainty is fuelling speculation about possible impacts and outcomes - particularly on access to the single market and the continuation of subsidies.

The EU’s Common Agricultural Policy accounts for about 40 per cent of the EU’s budget and provides a healthy injection of subsidised support to member country farmers which in turn fuels a relatively healthy machinery market.

So what happens to British ag machinery manufacturers like JCB? If British farmers lose subsidies what impact will it have on sales? Will the EU impose tariffs on imports? What even of the migrant labour that fuels many of the factories building ag equipment in the UK?

These are questions causing significant discussion amongst JCB executives and no doubt, every other mother country manufacturer.

JCB chairman Lord Bamford urged staff to vote for Brexit believing the EU was over burdened with bureaucracy and stifled market opportunity rather than promoted it - even though the EU accounts for 22 per cent of JCB’s turnover.

JCB had traded with Europe prior to formation of the EU and would do so afterward he wrote in a letter to staff prior to the vote.

“The UK is a trading nation and the fifth largest economy in the world,” Lord Bamford wrote.

“I am very confident that we can stand on our own two feet.

“I believe that JCB and the UK can prosper just as much outside the EU, so there is very little to fear if we do chose to leave.”

Now the Brexit vote is decided, JCB agriculture general manager John Smith, says there is uncertainty about what Brexit will mean

“We’ve got relationships with customers, dealers and subsidiaries all through Europe and have had for over 50 years in most countries.

“We have strong market share and strong relationships so at the moment it is business as usual.

“We imagine whether it is ‘hard’ or ‘soft’ Brexit we will continue to trade with those markets,” he told Fairfax media.

“Commercially if it becomes more challenging, then we will have to overcome that in some way, means or measure”

He said it seemed likely a ‘hard’ Brexit - meaning the UK would find itself outside the European trading zone - unlike arrangements with some countries such as Norway, which are inside the zone but not a member of the single market.

Mr Smith said with a 60 million population the UK was large importer which would help strike trade deals and added that the strong sterling exchange rate in the past few years had been a concern.

“Latterly the sterling has weakened and for exporters that is a good thing.

“We certainly seen an increase in sales from the consequences of a weakening sterling and the flexibility that gives us commercially.

That can be balanced in part by JCB importing some componentry, he admitted.

“On lower volume products we certainly do buy componentry from Europe, so there will be some ups and downs.”

On the labour supply front Mr Smith said the company actually experienced problems bringing in staff from their seven Indian plants due to EU regulations.

“We’d like to share skills but at the moment that is not easy to do - potentially as we move away from the European Union that will give us some freedom.

“There is some uncertainty about European staff working here that are not permanent residents though.

“At the moment we can only trade within the environment we know,” he said.

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