Impact of Brexit on Manufacturing Industry - Managerial Finance

This study analyzes the impact of Brexit on the manufacturing industry. It discusses the macroeconomic impacts of Brexit and how it affects the manufacturing output, supply chain, and overall cost of market accessibility.

Running head: MANAGERIAL FINANCE
Managerial Finance
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Introduction
The current study helps in understanding the effect of policies of BREXIT on particularly
manufacturing industry. The macroeconomic impacts of Brexit both during the short and long
term can aid in comprehending insinuation of the same that subsequently can help in
understanding overall gain or else loss. The section at hand elucidates therefore elucidates in
detail about impact of the policies of Brexit with special emphasis on a specific industry that
is manufacturing industry (chosen for the study).
Impact of Brexit on manufacturing industry
Brexit can necessarily be the impending withdrawal of the United Kingdom from specifically
the European Union. In a particular referendum, it was mentioned that around 51.9% of UK
electorate voted in favour of leaving the European Union. Also, the rate of turnout was
recorded to be 72.2%. As suggested by Danielson et al. (2016), there have been several
attempts to frame macroeconomic insinuations of particularly the Brexit, approximately all of
which indicates that there is a long term loss of gross domestic product for the economy of
UK in comparison to status of specific quo projections of staying entirely in the EU as well as
single market. In the context of macroeconomics it can be hereby said that loss of GDP lead
to low level of employment. Demand from different other EU nations comprises of roughly
12% of particularly final demand for goods as well as services of UK and this necessarily
translates into roughly 3.3 million jobs (Gitman et al. 2015). Particularly, there are certain
segments of actions in which losses of job are likely and Brexit can enhance jobs. The direct
influence of Brexit can permit the UK to save on current disbursements into the budget of
EU.
Disruption is said to be enhancing exponentially in particularly the world of manufacturing.
Particularly, beginning from talent and technology, counting industry 4, to Brexit and latterly

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the election of Trump, there are several risks as well as opportunities. Uncertainty along with
loss of business confidence can be considered to be important issues presently facing
manufacturers of UK (Becker et al. 2017). The manufacturing output can be affected by
lower degree of accessibility to the market of Europe, even though some form of free trade
partnership is liable to be negotiated. Worldwide payments along with currency risk can
enhance. Several small manufacturing firms fail to realise that they have options to mitigate
risks of currency and shield trading profits by way of planning future currency earning and
expends.
In addition to this, the capability to enhance investment capital before vote during a climate
of uncertainty can be made harder. However, during the period of exit, the entire British
economy might perhaps not respond positively to separation from particularly Europe with
decreased burden of carrying specific member states (Evans 2016). The centre for economic
performance has predicted a loss of roughly 2.2% of gross domestic product in UK, founded
on remaining with an FTP and three to four times higher in case if the same cannot be
negotiated. In essence, a Brexit can be regarded to be a perilous gamble. Thus, in their own
words, the BREXIT can be considered to be a perilous game (Wadsworth et al. 2016).
However, it can be hereby said that there are necessarily very few number of leaders
operating in the financial as well as manufacturing industries who have officially recorded
about the belief regarding impending gain acquired from Brexit. Essentially, it can be
considered to be reasonable to suppose that there are major political parties that will unite on
this specific issue in a way they did on particularly Scottish referendum.
Brexit reflects a new strategic risk for diverse businesses that like other risk facets need to be
systematically analysed, managed and thereafter mitigated (Colantone et al. 2018). In
essence, manufacturers have the necessity to recognize the influences of Brexit on important
business actions across both office systems that is both front and back systems in the

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following two years. With the passage of time, they might have the need to rethink models of
business and concentrate on overall efficacy. Following period of Brexit, supply chains can
necessarily become over complicated since the introduction of particularly customs
inspections and regulatory necessities enhances the time taken to acquire goods from one
nation to another (Evans 2016). Fundamentally, the costs incurred for moving goods for the
purpose of manufacturing or else distribution can almost certainly augment as a consequence
of tariff otherwise non-tariff barriers. In this regard, it can be hereby said that businesses have
the necessity to evaluate the influence by means of extensive audit of supply chain, rigorous
enterprise resource management, and long term forecasting (Becker et al. 2017).
The movement of particularly people that refers to immigration and operations can be taken
into account. In particular, the movement of individuals is not essentially a detached issue
from trade of goods. Any kind of deal undertaken with necessarily the EU has the need to
address facets of status of subsisting workers (Dhingra et al. 2016). The corporations shall
need to take into consideration the way new immigration necessities influence workforce
mobility and access to skill and as a consequence the labour cost.
Overall cost of market accessibility:
As the Brexit side triumphed in the referendum during the year 2016, Sterling has essentially
depreciated sharply. In this context, it can be hereby said that sentiment is that this occurs for
primarily two different reasons. Hobolt (2016) suggests that Brexit shall deteriorate domestic
demand and increase reporting cost, either by means of trade barriers, or by means of
decreased inward investment and productivity in particularly export segment.
For businesses are said to be affected by decisions regarding capital investment as well as
overall business confidence. Furthermore, while markets could quickly recover from election
outcomes, corporations can look towards insulating themselves against the possibility of life

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outside the single market. As such, for different manufacturers particularly trading with the
European union get disrupted and tend to become complicated and more pricey (Danielson et
al. 2016). In essence, their capability to employ nationals of EU might perhaps become
challenging since free movement of necessarily labour gets curtailed. The fall in the Sterling
value will make exports relatively more competitive but might also raise overall costs of
intermediate inputs that are imported that in turn can affect prices of output. Particularly these
business concerns have the need to make certain that they have complete visibility of supply
chain, procedures of hiring and exposures of currency (Gitman et al. 2015). In order to
prepare for influences of Brexit, business concerns are suggested to plan for the scenario of
optimum alteration. In this case, trading carried out under WTO circumstances, even though
for a temporary period can insulate themselves from different disruptive consequences. In
case if the scenarios take place, it can become easier to handle and all possible avenues can
be explored. Four out of five UK manufactured vehicles that are exported and more than half
of the totals of manufactured vehicles go to the EU (Colantone et al. 2018). In addition to
this, automotive manufacturing can be considered to be comparatively more sensitive to
particularly Brexit than many other segments. Nonetheless, there are different UK based
manufacturers who keep in mind the regulatory influence of Brexit.
Conclusion
Based on the above study it can be hereby said that overall proportion of output that is
necessarily exported to the European Union is extremely important. The study reflects that
manufacturing output can lead to lower degree of accessibility to Europe, even if some form
of free trade affiliation is accountable to be negotiated. Worldwide payments together with
currency risk can increase. The Brexit can help UK to reduce pricey regulations, even though
some of the amounted claimed exaggerate the likely advantages. Brexit can reduce

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manufacturing exports by roughly one third and thereby negatively affect the manufacturing
industry.

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References
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