Electronics manufacturing stretches across the world so that shifts in one country inevitably affect everyone. Likely, the planned withdrawal of Britain from the European Union (Brexit) late next year will create ripples that we are only just coming to understand.
Consider these hard figures. According to EEF, UK manufacturing currently:
- employs 2.7 million people
- contributes 10% of gross value added (GVA)
- accounts for 45% of total exports
- represents 68% of business research and development (R&D)
- provides 14% of business investment
Further, because of the change, trade agreements between the European Union (EU) and the UK will end and the UK will embrace World Trade Organization (WTO) terms. Almost immediately significant customs duties will result. Further, UK-based organizations may face uncertain business outcomes. Taxes may change. Contract Negotiations may shift in unforeseen ways. ] Brexit’s impact on supply chains will be driven by various factors including: export tariffs; foreign exchange rates; and the UK’s labor market regulations, immigration laws, and tax policy
As the reality of zero tariffs and expedited paperwork ends, electronics OEMs should be rethinking their supply chain strategies. Automotive, technology, and aerospace are among the key electronics verticals that are expected to suffer in the wake of a hard exit from the EU. Pundits at Bain & Co. say that net profits in these arenas could fall by as much as 30%. Some companies with a presence in the UK will opt to move production to another country. Other OEMs may find an increased investment in Britain prudent. And, of course, some may feel reluctant to do anything at all, wanting to let the scenario play out some before taking action.
Bain offers leadership teams a handful of guidelines aimed at helping manufacturers anticipate how Brexit will play out for their organization:
- deﬁne the speciﬁc uncertainties your business might face and their economic impact on your company (absolute and relative);
- formulate a set of probable scenarios and their economic impact;
- devise a speciﬁc set of strategic options; and
- identify a clear set of signposts for action.
Take a look at the infographic below from Bain & Co. to see more about some of the possible shifts.
— Hailey Lynne McKeefry, Editor in Chief, EBN