Not exactly what the majority of the engineering sector would have wished for...

Will Brexit lead to 'Techxit'? What does the vote mean for UK engineering?

The voice of the public has spoken. 52 per cent of those casting their ballot in the Brexit referendum want to get out. However, earlier surveys conducted in the engineering, technology and manufacturing sectors suggested the industry would have wished a different outcome. What does the Leave vote actually mean for the engineering and technology sector? The answer is that we don’t know.

The Institution of Engineering and Technology issued a statement calling for an immediate discussion on mitigating the presumed negative effects of the Brexit vote on the engineering sector. These effects would translate into impairment of the UK economy, which is already being hit by the pound sinking to a 30-year low in the wake of the result.

“We concluded that at a time when we have a huge shortage of engineers, limiting the number of professional engineers that could come and contribute to our economy would affect the industry and the nation’s financial wellbeing,” said IET President Naomi Climer.

Recruitment of European workers is only one of the areas of uncertainty that will affect the sector. Funding for research and innovation, access to the European Single Market and the ability to influence EU regulations have previously been identified as the key areas of concern.

“Politicians now no longer have the excuse of EU interference and need to act quickly and effectively to offset what as most economists believe will be a period of uncertainty,” said Ian Cass, Managing Director of the pro-leave Forum of Private Business. “This means the UK’s 1.3 million employers will need support in managing this period of disruption if it is to continue to drive the British economy.”

Although it will take at least two years for the UK to withdraw from the EU, the uncertainty of the UK’s post-EU arrangements is already forcing many companies, especially in the technology sector, to consider relocating to the continent.

“Already, there has been fluctuation on the value of the pound and this is something that needs to be counterbalanced, if it’s not to cripple the UK’s ability to trade profitably in an international market both now and in the future,” said Askar Sheibani, CEO of Comtek, a provider of repairs, spares and support to the telecoms, datacoms, and network service industry.

“What’s more, many companies based in the EU will be looking to attract agile UK-based firms, such as those in the technology industry. With the advantages of a single market across the water and possibly a weakening UK economy at home, it will be no surprise that some firms seriously consider a shift in focus, potentially turning 'Techxit' into a reality.”

Matt Hunt, CEO of app developer Apadami Enterprise confirmed that 'Techxit', a mass exodus of technology firms, is not entirely unthinkable.

“The UK tech industry has been in a strong position and the only limitations we’ve faced to do business has been our own ability,” he said. “With the impending Brexit, there is now a high level of risk and uncertainty over our future and questions are being asked as to how will we be able to build on our success and further grow without the support of the EU.”

Although calling the Brexit vote ‘the possibility that many manufacturers had feared’, Stephen Cooper, head of Industrial Manufacturing at professional service company KPMG UK, admitted the vote could indeed have a positive outcome.

“We should not lose sight of the fact that this result can also lead to opportunities for manufacturers; a drop in the value of sterling could make the UK a magnet for trade, and the need to reshape trade policy may result in quicker decision making, and reduced red tape,” Cooper said.

“Of course, we are only day one after the vote and the full implications will only become clearer with the passage of time. Organisations will need to consider the tactical, short terms implications, particularly relating to market volatility and the impact on trading. However, the importance of maintaining a focus on the longer-term planning whilst in the midst of a tactical response is paramount.”

It has been claimed that leaving the EU would result in an increase in energy prices. Some analysts claim this cost increase would force especially small business owners to improve energy efficiency of their operations.

Yet environment group Friends of the Earth Scotland is sceptical that Brexit could have a positive effect on the UK’s climate change-battling strategies.

"Many of the politicians backing the leave vote are climate sceptics and against renewable energy, and much of the 'red tape' they complain about are the laws that have given us cleaner air and water, and forced companies to reduce pollution,” said Director Richard Dixon.

"One of the biggest reasons for being in the EU has been to work together to tackle climate change. Being out of the EU will mean the UK will have to negotiate its own climate targets with the UN and the people in charge are very unlikely to share Scotland's high ambition."

Some also believe that restricting free movement of European workers could be a benefit, not a drawback, as the country could put a visa system in place that would allow selectively inviting candidates with the right skills while not exceeding the immigration quota.

Questions remain around what would happen with those European workers that are already in.

The innovation, science and research sector, overwhelmingly in support of the Remain vote according to pre-referendum surveys, now faces questions over funding and the ability to keep participating in pan-European research projects.

Claims of Leave campaigners that any shortage of funding from EU would be easily replaced by the UK government, which will no longer be obliged to send money to EU, were dismissed by Remain supporters and economists.

"It only takes a 0.6 per cent movement in our wealth, GDP only has to be hit by just over half-a-percent to eradicate the £8bn - not £19bn that they were claiming - the £8bn that is sent to Europe and distributed through farming subsidies etcetera,” said Labour In campaign chief Alan Johnson ahead of the referendum.

Most agree that the UK will face some tougher times, at least in the short term. What happens in longer term future remains to be seen. The only country to have withdrawn from the EU in the past is Greenland, which did so in 1985. The island actually benefitted from the decision but as BBC put it, the only commodity they export is fish.

“No nation has ever left the EU, so the long-term impact cannot be accurately forecast at this time,” said Patrick Flaherty, Chief Executive of engineering firm AECOM UK & Ireland.

“These are unchartered waters made even more uncertain by the Prime Minister’s announced resignation and the leadership election that will follow. As a country we must navigate wisely. Business must support government as it leads the country through this period of change.”

Brexit: next steps infographic

Brexit infographic  

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