27/06/2016
As reality starts to sink in, we start to look at what happens now for the construction, engineering and manufacturing sector. At the moment, uncertainty reigns, both economically and politically. Therefore, as much as it is not a satisfactory answer, the only answer we have is, “we don’t know”.
Commenting on the referendum decision, Terry Scuoler, CEO of EEF, the manufacturers' organisation [www.eef.org.uk] says:
"While it is not the result many businesses wanted, it's the democratic will of our nation. The Government must move very quickly to stabilise the economy, reassure the markets and shore-up business confidence. The process of leaving the Union will take some time, and the Government should not rush to instigate Article 50 and the formal exit process, while there is so much uncertainty. Ministers must think carefully about our negotiating position while setting out a clear roadmap for establishing a new deal with the EU which remains our biggest market and trading partner."
"We need a clear vision for a new relationship between the UK and the EU, but we must also avoid throwing the baby out with the bath water. In the complex task of unpicking the UK from EU regulation and legislation, the Government must tread carefully, keeping if we can a trading relationship with the single market, avoiding dramatic overnight changes and not becoming bogged down to the detriment of making long-awaited and much-needed decisions on projects vital to our future economic prosperity. We must also ensure that the skilled workers we need are still encouraged and enabled to live and work in the UK."
He added that manufacturers have a series of priorities for any forthcoming negotiation, including:
-
Securing access to key markets for goods and services
-
Ensuring regulatory certainty
-
Addressing the UK skills gap
-
Domestic policy focused on shoring up investment.
Future trade
Businesses’ biggest foe is uncertainty. And at present very little seems certain at all, even whether or not the incoming Prime Minister will trigger Article 50, (the mechanism for leaving the EU). What we do know is that the two-year time period that has often been talked about only relates to the severance of ties between the exiting country and the EU, not the future trading relationship. However, the two-year period is when decisions are made regarding the rights and residency status of EU nationals working in the UK, something that will provide certainty and, hopefully assurance, to the construction, manufacturing and engineering sector, that for the past ten years has relied heavily on skilled labour from the EU, especially from the East.
The agreement for future relations with the EU, including trade, is a separate and distinct agreement, estimated to take at least ten years to negotiate. Up until the end of the two years in which our ‘divorce’ settlement is reached, the UK will have full access to the free market and it will be business as usual. After that we enter into the unknown. In theory, once two years passes, access to the single market as we know it ends, as does all trade agreements we currently have by virtue of being part of the EU.
Of course, there is nothing to stop simultaneous negotiations carrying on during the two-year severance period, even if it was only to put in place temporary, bi-lateral treaties to ensure trade carries on relatively unaffected after Autumn 2018 (assuming the new Prime Minister evokes Article 50 immediately upon taking office).
In summary
Every industry in the UK is having to work in an environment of uncertainty at the moment. There are many areas at risk when Britain does leave the EU, such as the future of free movement of supplies, services and labour. If the right deal is not struck, the consequences for industry could be severe. The Government must also ensure that project-funding and investment continues, as this is what will help protect the economy over the next few years.
There are no answers at the moment. However, we will be watching the situation closely and will be updating our clients as developments happen.
Please read our two blogs written Pre-Referendum result:
Fisher Scoggins Waters’ solicitors specialise in construction, manufacturing and engineering. If you would like legal advice, please phone us on 0207 993 6960.