Brexit has pushed UK firms to move to Germany or relocate to EU
6 Min Read
British firms remain at the edge of their seats to see if the UK intends to compete with the green energy and tech subsidies pitched by the US and EU.
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An anti-Brexit protestor near the UK Houses of Parliament in July 2022. (AFP)
Ever since Britain left the European Union, customs delays and bureaucratic setbacks have taken a toll on British firms such as Farrat, a small manufacturer in Manchester, which is ramping up investment to compensate - in Germany.
The anti-vibration parts manufacturer for buildings and machinery is expanding rapidly but has suffered Brexit's consequences.
Chief executive Oliver Farrell said, "We are now channeling a lot of investment in setting up production facilities in Germany to remove the trading friction," as "Brexit is materially restricting our growth now."
According to German data procured by Reuters, 170 foreign direct investment projects by British firms opened in Germany last year in the bloc's single market. That's a far cry from the 50 inquiries from British firms recorded by German Trade & Invest in the year before Brexit.
The Dutch government stated that over 300 "Brexit companies" moved operations to The Netherlands since 2016.
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Earlier this year, business investment within the UK maintained at about 1% above its level during the June 2016 vote for Brexit. Over the same period, business investment soared 25% in France, 21% in the US, and 7% in Germany, per data from the Organisation for Economic Cooperation and Development.
'Nothing positive to say'
Pro-Brexit economists beg to differ. They claim that the data does not account that British corporate investment flourished in the years before 2016, and it was bound to slow.
Manchester mayor Andy Burnham states that such a narrative is common among business owners in and around Manchester.
"Barely anyone has anything positive to say," he said. Burnham is a member of the opposition Labour Party and was with the idea of keeping Britain in the EU. "In most cases, it's added a layer of complexity that they didn't have before."
He stated that the EU market remained significantly important for Manchester, which is the third biggest city in Britain after London and Birmingham.
Official estimates show that about 61% of goods exports from Greater Manchester went to the EU in 2019, as opposed to 42% of exports from London and the southeast of England.
The mayor added that Manchester has been successful in attracting international trade and investment but the feeling that easier trade ties would have made it even better was common just like at Farrat.
Some firms in Manchester are investing in production facilities in the EU to avoid trade disruption, while others see no choice but to share new business with firms in a better position to work in the EU.
'Rubbing salt in the wound'
Another firm facing obstacles is advertising and marketing agency Creative Concern, which has formed a strong EU business within the last 20 years, but founder and director Steve Connor stated that it always was business as usual in the years even after Brexit, until trade terms with the EU applied in January 2021.
Creative Concern now finds it difficult to bid directly for projects with the European Commission, even though others from non-EU countries can.
"Because our government, in its infinite wisdom have chosen to pursue a hard Brexit, we find ourselves more disadvantaged than other non-EU countries, which is rubbing salt in the wound," Connor said.
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The British government sees EU relations as progressing, referring to a memorandum of understanding for financial services trade signed in June which was described by finance minister Jeremy Hunt as a "turning point" in dialogue with the EU.
British firms remain at the edge of their seats to see if the UK intends to compete with the green energy and tech subsidies pitched by the US and EU, as the government voiced its target to reach net zero emissions by 2050 by believing that free markets are the best way to reach that.
Zero reliability
Farrell described feeling unease toward British firms from potential foreign clients. "People are nervous. We're going to customers who are saying, 'Great, this is a good technical proposal - but hmmm, we're going to have to get British guys on it'".
3P Innovation, another manufacturer south of Manchester which makes automation equipment for healthcare and food industries using machinery paired with isolation units, missed out on an EU contract because the client saw it risky to send the isolator unit to Britain to pair with 3P's machinery before returning to the EU because of the potential for customs checks and delays.
Founder Dave Seaward said: "So that was a contract that we know we lost just because we're no longer in the EU", adding that easy access to the EU's CE certification program is key to his company's survival since the safety, health, and environmental requirements are demanded by clients in the EU, as well as US and Japanese customers who want CE-certified equipment.
So far, in the wake of Brexit, there are very minimal signs that firms are bringing production back to Britain but according to research by think-tank UK in a Changing Europe, some are considering it.
"EU customers ... want less hassle. They don't see the UK as a reliable supplier," said Subrah Krishnan Harihara, head of research at the Greater Manchester Chambers of Commerce (GMCC), adding: "The long-term impact of this is probably going to be that fewer businesses are keen on taking up the opportunities for international trade".
