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Brexit: Pros & cons for the automotive, construction and agricultural industries

Put Britain and Exit together and you get – Brexit, according to Google Trends the most common word searched within the UK in February 2016. Social media has played the part of being Brexits home for debates, opinions and questions from the general public to enhance their understanding, ahead of the EU referendum on Thursday 23rd June 2016.

Although it is hard to predict the exact repercussions of leaving the EU, most of the campaign has revolved around particular trade sectors with a heavy influence on Britain's economy. We appreciate that to many individuals, the campaign has become so complex, that unless you have followed it from the beginning you may fall behind on the most essential aspects of Brexit, so it is important for us to put an easily digestible and quick guide together, on how this campaign may affect or may not affect, your everyday life here in the UK.

At Moore (South) LLP we have built in depth knowledge of many sectors and proactively use our sector expertise to add value to organisations. We have specific specialism's in automotive, charities, owner managed businesses, real estate, construction and food and agriculture. These sectors have been discussed via the media, throughout the Brexit campaign. We have put together an ‘in’ or ‘out’ guide to highlight some of the most discussed sectors, automotive, construction and agriculture, to spot the pros and cons, the advantages and disadvantages of both remaining in the European Union or leaving the European Union.

In 2013 the UK automotive industry reported revenues of £60 billion. GOV.UK reported that ’11 major vehicle manufactures and 18 of the world’s top 20 suppliers to the automotive industry have operations in the UK.’ Overseas investors bring big investment opportunities to the industry and the industry is further helped from the government e.g the Regional Growth Fund (RGF).

How does the automotive sector benefit from the EU?

The EU carbon emission targets along with their specific incentives have encouraged the UK automotive sector to become more innovative and it has created competition across the industry to create and develop smarter and greener technologies. This has of course, impacted the dreaded two words for car owners: ‘fuel prices.’ EU carbon emission targets have encouraged consumers to think more wisely about travel options soaring fuel prices have seen a boom in more fuel efficient cars and electric cars have more than doubled.

The automotive industry adds colour to a rather bleak UK economy at present. The automotive industry continues to rapidly grow in both output and productivity, helping to restore the UK’s position as a global manufacturing hub. This resurgence has been based on a range of factors but especially important has been the continued increase in foreign investment, international trade and innovation.

What will happen if we leave the EU?

The automotive industry supports 800,000 jobs across the UK, the Society of Motor Manufacturers and Traders (SMMT) represents 88% of large automotive companies in the UK and the majority feel that leaving the EU, could jeopardise the amount of foreign investment received. 80% of all vehicles produced in the UK are sold overseas and half of these are sold within the EU.

If the UK were to leave, Britain could negotiate a new EU relationship without being bound by EU law. It can secure trade deals with other countries such as China, India & America. Many speak of the British government having the power to renegotiate a unilateral free trade deal with the EU, but this would not mean completely unrestricted access to the single market.

It is rumoured British produced vehicles would face import tariffs from 10% to 22%, as well as being met by regulatory barriers, but again, it would free up opportunities for more international trade, in particular countries like Japan and China who both have a boosting automotive industry.

The UK construction industry contributed £103 billion to the economy in 2014 and the House of Commons Public Library stated that the industry itself created and filled 2.1 million jobs (equivalent to 6.2% of the working population). The industry was particularly affected during the last recession, but is praised for its rapid recovery from 2009 onwards.

How does construction benefit from the EU?

The construction industry lies heavily within trade and so most obvious discussions around trade and the EU are relevant here.

It has been estimated that UK trade with some countries in Europe, could have increased by as much as 50% as a result of EU membership. Being part of the EU is having the right to free movement, making immigration between member states relatively easy. This is important when it comes to skilled labourers within the construction industry, as many individuals that head to the UK from other countries within the EU fall into skilled labour occupations, like construction.

With skilled and non skilled labourers coming into the country and immigration at its highest, it is rumoured those from other countries within the EU will still be able to move freely. With this will become the increasing need of housing, therefore the construction industry will not become bleak.

What will happen if we leave the EU?

Constraints for travel will be put in place if Britain leaves the EU. This would have an effect on contractors working overseas. Global growth in construction has opened up a plethora of overseas employment opportunities. Those working overseas may find their trips become more expensive, this is because the announcement at the end of April in relation to a weakness in sterling. Kit Juckes from Societe Generale stated that 'Any closes below $1.42 (against the dollar) or above £0.7850 (for the euro) would continue to weaken sterling.' This in turn would mean that those having their wages paid in sterling may see their wage decrease.

Trade has been a much talked about subject when it comes to a potential Britain exit, in particular this would effect the cost of the construction industry's imported materials. According to Statista the USA in 2014 placed at the top of the 'Leading Import Countries Worldwide 2014 data.' Closely followed by China, Germany, Japan the UK and France, this could mean that the future for imports and the cost to business looks challenging.
However, many see leaving the EU as an opportunity for the UK to make a clean break with the EU and instead rely on the World Trade Organisation for importing materials.

Agriculture throughout the UK is accountable for 476,000 employed people and uses 69% of the country's land area. East Anglia is where you will find the most agricultural activity for crops and South West is where you would find the most rural spots for livestock. Land owners and farmers provide many of the environmental and social benefits that the wider public value, support and expect from the countryside.

The agricultural industry has been widely discussed in the run up to Brexit and has been somewhat controversial. David Cameron's farming minister George Eustice told the National Farmers' Union (NFU) that they would 'do far better as a country if we ended the supremacy of Europe and shaped new fresh-thinking policies that really deliver for our agriculture.' In contrast to Eustice's opinion, the secretary of state for environment, farming and rural affairs Liz Truss pleaded with farmers to say within the EU.

How does agriculture benefit from the EU?

The Common Agricultural Policy (CAP) is a cornerstone of the EU, costing nearly €58bn a year. The CAP was set up back in 1957 to sustain the EU's food supplies by further boosting all agricultural activity. CAP helps to provide financial support to around 12m farmers across Europe. Many farmers are worried that an exit from the EU would mean that farmers would mean that they would no longer be entitled to CAP and are unsure of what financial policies could further help them within the industry, therefore CAP is vital to the agricultural industry.
NFU online reported in 2014 that the EU is in the process of negotiating preferential trade agreements with an unprecedented number of third country partners. The European Commission stated that if it were to complete current free trade talks it would add around €275 billion to the GDP of the EU.

What will happen if we leave the EU?

Supporters of Brexit often refer to Norway and Switzerland as examples for how the UK could survive in the case of Brexit. Both countries are known to have set up their own versions of CAP which actually provide a higher level of support to farmers.

Leaving would mean that the UK would be freed from what some refer to as complexities and burdens of CAP, for example CAP greening. This innovation was brought under the 2013 CAP reform in order to make the direct payments system more environmentally friendly. Greening works via farmers receiving an area-based payment and therefore have to make use of various straight forward, non contractual practices that benefit both the environment and the climate.

Exiting the EU would provide the opportunity for the UK agricultural trade to strike up World Trade  and the prospect of being able to sell British agricultural and food markets to the world would leave the British economy in a much better condition post-Brexit than it is now.

This guide has been put together to create an unbiased view on how Britain benefits from the EU and how Britain could benefit in the event of a potential Brexit. We have addressed main concerns that have risen in the media in relation to each sector, in order to assist the general public in helping them to make what they feel is the correct decision on the 23rd June 2016.