Skip to content

Power Systems Research: BREXIT – What happens now?

Now that the UK has decided to exit the EU, we need to consider what effect this will have on our industry.  It should be noted that the formal process of leaving the EU can take up to 2 years or more, so the uncertainty of the future will be with us for at least … Continued

Now that the UK has decided to exit the EU, we need to consider what effect this will have on our industry.  It should be noted that the formal process of leaving the EU can take up to 2 years or more, so the uncertainty of the future will be with us for at least this year and next.  It is this uncertainty that will fuel the short term effects.

The immediate effect has been for sterling to fall in value and, while it is expected to slowly increase, we expect it to stabilize at a level below its recent trading range.  This will have the effect of increasing the price of oil and imported goods and drive an increase in inflation within the UK.  It will also have the effect of making UK produced goods cheaper – at least in the short term.

The other immediate effect will be for businesses in both the UK and the EU to step and take stock of this new situation and re-evaluate their forward plans.  The effect will be to reduce GDP in Europe for this year and probably next year.  For the powered equipment industry, we expect to see a small but measureable negative impact on demand in the short term.

In the longer term, international businesses are expected to re-evaluate their investment plans to focus their operations more in the remaining EU countries and less in the UK.  UK manufacturing in the agricultural machinery and automotive sectors are some that are expected to be involved.  We have already seen indications from international financial institutions that they will plan to move staff from London to EU centres like Frankfurt and Paris to keep the core of their European operations within the EU.

For the powered equipment industry, the effects are not believed to be more than just a temporary hiatus felt mainly in Europe.  The global demand for trucks and tractors is not expected to be impacted after the temporary ‘shock’ effect in 2016 and early 2017 alluded to above.

The exit settlement that is eventually negotiated between the EU and the UK is expected to be a tough one.  There is concern that further countries and regions within the EU are also looking to a possible exit and a tough settlement could very well dampen pressure for further breakup.  In fact, we expect to see moves within the EU now that the UK has left for an even closer financial and political union.

For the UK, politically the aftershocks are yet to come.  Scotland is looking to have another referendum to leave the UK and possibly North Ireland will look to also leave.

One last thought: since there are nearly 4 million signatures on a petition calling for another vote, it’s possible that the entire situation could be turned on its ear, if another vote is taken. In general, the business and banking sectors would like to stay within the EU, so it’s entirely possible that a strong push from these groups could overturn last week’s vote.

https://www.automotiveworld.com/news-releases/power-systems-research-brexit-happens-now/

Welcome back , to continue browsing the site, please click here