View from Washington: Brexit has already begun for engineers

New engineering projects that could extend beyond March 2019 are increasingly being planned without UK involvement. For engineering, Brexit has already begun and inward investors are being forced to exclude the UK from major projects now because of supply chains and design cycles.

The task of commenting on how foreign investors and partners are reacting to progress on Brexit has made the last fortnight very depressing. One overriding point must be made. The UK is being excluded from major international engineering projects already. Either that or steps are being taken to line up second non-UK sources for everything from raw materials and components to design services.

This is not Project Fear. Nor is it a consequence of the UK’s democratic decision. It rather concerns how the Brexit negotiations are being bungled. That business leaders prefer to whisper as much in the ears of avatars like myself or – probably to greater effect – delegate their frustrations to organisations like the CBI and the IOD should come as no surprise.

Inward investors have projects and orders in hand that will be completed before March 2019. For these, they are wary of disrupting supply chains and demotivating UK employees. Cynical? Hardly, merely the day-to-day realities of running a company. It’s called common sense. The main cause of the UK’s removal after Brexit Day is easily diagnosed. Companies feel that they cannot plan for anything other than a hard Brexit with confidence. The UK’s political leadership is giving them no alternative.

Engineering was always likely to be hit early. It is a complex business. In a recent print column for E&T, I cited research from consultancy McKinsey & Co that the design and development cycle for a semiconductor project at an efficient company is 90 weeks (it can stretch out to nearly 150 weeks). If no EU-UK deal is reached, as of today (October 16) the UK is just 75 weeks from the WTO cliff-edge. The maths are simple.

Silicon is one example. Major housing and civil construction projects often have cycles and supply chains that are comparable or significantly greater in length. Software development, too. We live in a complex world. Some things still take time. This brings us back to the events of the last fortnight. In that time, we have had Prime Minister’s Theresa May’s Florence speech, two party conferences (the assumption that Labour is a government-in-waiting is growing) and an endless series of hardly useful high-profile interviews with politicians on both sides. And - ‘twas ever thus - there have been plenty of contradictory leaks to the press. Notwithstanding Mrs May’s horrendous luck in Manchester, the only consistent thread has been inconsistency – and that charge applies to both of the UK’s largest political parties.

Amid talk of a transition/implementation period, managers are asking themselves what chance of that if the UK still cannot present a coherent position? Of course, the world’s engineering CEOs do not hang on every nuance of Brexit. OK, maybe James Dyson does. Usually, though, they employ very smart people to do that for them and then take a view. So for articles like this, I pester a ‘panel’ of about a dozen execs: CEOs, CFOs and their close advisors. Not all can reply each time, but a healthy majority usually does. The consistent tone is familiar: “Westminster, are you listening?”

While that is hardly a statistically impregnable sample, their companies’ commitments over time represent many hundreds of millions, nay billions of pounds of UK inward investment. Almost all think that a Brexit on WTO rules has become the sensible assumption, one that they must bring to the fore during current corporate planning. Hence that earlier observation: the UK is already being designed out of major projects. Brexit is here. But concerns go further. Few inward investors wanted to see Brexit. Once it happened, though, most accepted it. It was a democratic vote. Yet a wide assumption was that the government would work towards a solution that balanced the people’s decision and the needs of the economy. Let’s be blunt: the broad assumption was that a Conservative government would be more accommodating of business. That Tory reputation is being trashed.

Meanwhile, there’s little enthusiasm for the man whom one US CEO called ‘Bernie Corbyn’. Given all this, asking ‘What’s to be done?’ seems moot on the side of inward investment. It largely is being done. The question has become one of mitigation, or a quick admission that Brexit simply won’t work, or some real detail delivered immediately. Whether you were a ‘Yes’ or ‘No’ voter has become almost effectively irrelevant. The demand, ‘How do we do this?’ now goes far beyond the dualities of a referendum. It stabs into a basic issue of competence. And deeper every day. The blood is already flowing.

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