Governor of the Bank of England, Mark Carney


Prime Minister, Theresa May


What does Brexit mean for Britain’s exporters?


Britain’s exit from the EU is now the political hot potato around the world. Nine non-EU countries have entered exploratory trade agreement talks with the UK. But there is still very little clarity about what Brexit will mean to UK plc.


Prior to last June’s vote to leave the EU, Mark Carney, the Governor of the Bank of England, was recruited by the Remain campaign to warn that Britain would fall into a mire of doom and despair if the Leave campaign won. In the weeks after the vote, it looked as


though the he would be proved right as the pound fell in value against other major currencies. But last month Dr Carney revised his


projections for UK economic growth upwards for the second time since the referendum. His comment came days after the release of


the Markit/CIPS survey for the end of 2016, which said that manufacturing activity across the UK had hit a 30-year high in December because of Brexit. It was also only a few days after it was


revealed that the UK had ended 2016 with the strongest economy of all the G7 countries. But the question that has to be asked is


whether they got it wrong or whether their timing was slightly off. “It’s still very early days in the Brexit process


and either side could still be proved right in the long run,” said Chris Hobson, Director of Policy at the Chamber. “Dr Carney predicted the fall in the value of


the pound and that happened. But what he didn’t mention was that the immediate result of a lower value pound would be a sharp increase in exports. “If the pound has less value then British-made


goods – and there is still strong demand for products bearing the ‘Made in Britain’ brand – become cheaper on world markets. “British firms reported burgeoning order


books. They stepped up production and recruited to meet rising demand.


20 business network February 2017 “As a result, the predicted drop in


employment didn’t happen and the country ended the year in a very positive position.” He added: “But the boom probably won’t last


and the trick is going to be managing what happens after we crest the post-referendum wave. “The lower value pound is a double-edge


sword. While it’s making UK exports cheaper on overseas markets it also buys less, which means our imports are getting more expensive.


‘Mrs May used her speech to ambassadors at London’s Lancaster House to tell the EU that it shouldn’t seek to punish the UK in a bid to deter other countries from leaving’


“Those imports include energy, oil or the raw


materials needed for manufacturing and production in the UK. “The increased costs will have to be passed on


to the end-user, which means prices of goods on shop shelves in this country and export prices are likely go up. “When that happens, order books could


shorten, production will probably slow and there could be demand for higher wages. The pressure on firms to make savings could put recent gains in employment at risk. The UK economy will rebalance itself. The trick will be preventing it swinging too far the other way.” The immediate inflationary impacts of Brexit


are expected to hit in months rather than years. But there could be more to follow. Many observers have predicted since before the referendum that the UK could face tariffs to


trade with the EU, and vice-versa, although this has yet to be determined. EU tariffs will add final point of sale costs to


imports and exports. Prime Minister Theresa May, in her first real


Brexit speech last month, said she would like to keep a free trade agreement with the EU. But she also said, and several voices from the


EU have been quite strong in sharing the opinion, that Britain couldn’t expect to cherry pick what it likes about the EU without paying its annual subscription, accepting open borders and, essentially, ceding sovereignty. “You can’t enjoy the benefits of membership


unless you’re in the club, as many of our EU neighbours keep telling us,” said Chris. A report from the German Chambers of


Commerce and Industry (DIHK) towards the end of last year said: “Brexit will significantly impact the business environment for German and EU businesses. “Given the close trade ties and interconnected


value chains, the relationship with the UK should stay as strong as possible.” It said that with trade volume of 127bn euros a


year, the UK is Germany’s fifth-largest trading partner. More than 2,500 German companies have branches in the UK and employ around 400,000 British people, while British businesses are the largest direct investors in Germany. A DIHK survey revealed that one in four German


businesses expected UK-bound exports to decrease due to legal and political uncertainty in the short term. The number doubles after Brexit. It said that 35% of businesses in Germany with


branches in the UK planned to reduce investment in the UK post-Brexit. The report added: “Both sides should continue to pursue a forward-looking and open trade policy.” Mrs May used her speech to ambassadors at


London’s Lancaster House to tell the EU that it shouldn’t seek to punish the UK in a bid to deter other countries from leaving. “That would not be the action of a friend,” she


said, having stressed that the UK wanted to remain a good friend and neighbour to the EU.


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