In the aftermath of her speech, rating agency Moody’s downgraded the UK’s credit rating and the value of the pound subsequently slipped. This was followed by controversy at the Labour Party conference as the party decided not to debate whether or not Britain should try to retain membership of the single market in the longer term. At the same time the next round of Brexit negotiations kicked off, with EU members due to give feedback on May’s proposals.
It may be more than 12 months since the nation voted to leave the European Union, but as recent developments underline it’s far from clear how the next couple of years are going to pan out. What is clear is thanks to the ongoing uncertainty UK businesses face a series of challenges ranging from exchange rate fluctuations through to supply chain security and a possible derogatory impact on costs and profits.
However, there are also opportunities, thanks to low interest rates and the fall in the value of the pound which increases the competitiveness of UK businesses looking to export products overseas.
“Currency changes do mean that UK goods are now more affordable overseas and this may therefore encourage exports of printed products – directly from the printer itself, but also indirectly by UK clients exporting printed products from the UK,” says Kyle Jardine, research and information manager at the BPIF.
To find out what the wider printing industry thinks about the opportunities and challenges posed by Brexit, PrintWeek spoke to a series of print bosses spanning a wide range of different sectors to canvas their views.
Miles Linney, managing director, Linney Group
“I find this subject really difficult to comment on as I just don’t know what to make of it. I do see it as an opportunity – that a weaker pound is better for exports. The pound has recovered to £1.14 versus the euro since [we voted to leave] and with the Brexit campaigns no-one really knew what would happen if and when we triggered article 50 and we still don’t.”
Alex White, managing director, Blackman & White
“From a manufacturing and sales perspective Brexit is a double-edged sword. Currently the exchange rate is making our machines extremely competitive in price. Britain and the EU are in the early stages of negotiations so the UK currently continues to benefit from the free movement of goods. With the potential introduction of trade tariffs on British exports it is difficult to predict the effect it will have on demand for our products. While the uncertainty surrounding Brexit is naturally a concern, at no point have we ever considered Brexit to be a catastrophe. In fact our company’s most successful fourth quarter sales were achieved after the Brexit vote. As a company we sell machines worldwide and we do not see this changing. We will continue to push our home market sales as well as our European sales irrespective of what happens to the value of the pound.”
Mark Cowin, managing director, Sign Build
“Opportunities exist everywhere and at all times – even in catastrophe. Using the word ‘catastrophe’ does not balance against the word ‘opportunity’. Immediately you evoke Brexit as a negative, when in fact it is a reality. It’s just headline grabbing and I think will bias certain people from reading the article.All sectors need to trade and leaving the single market does not mean we stop trading. Businesses always look to purchase locally and supply globally, this is a fact. If you’re looking for opportunities, as all businesses are, then produce goods we currently purchase from other countries including the EU. Supply these goods to our internal market and look to export these goods wherever we can. We purchase approximately £260bn from the EU and export £190bn. Rest assured that EU countries will want to maintain and increase that level of sales, but now have no political restraint upon them to buy British and I would expect the £190bn that the UK exports to the EU to reduce. Importantly, and where the economic balance falls in our favour, if the UK can reduce the imports from the EU, by producing within the UK, whilst expanding our sales back to the EU and importantly throughout the rest of the world on terms that suit us, rather than the EU, we should see an improvement in economic growth.”
Martin Ruda, managing director, Tall Group of Companies
“We do a significant amount of exporting to places like the Middle East, Africa and the Caribbean and we do a limited amount in Europe through a Northern Irish subsidiary that has a long-standing relationship with banks in the Republic of Ireland to whom we ship cheques and credit books. The change in the value of the pound against the euro has made us a bit more competitive and attractive in Europe and it has been the same situation with regards to the dollar in a number of these emerging markets. As far as Europe is concerned I am confident that common sense will prevail and that cross-border trade in particular will be as balanced as it can be and free of tariffs and hurdles.”
Mark Cornford, managing director, Integrity Print
“The weak pound has helped our export position and we have recently gained £2m of new work in Ireland. Current trading conditions remain challenging. The weak pound has resulted in significant increases in our paper and other raw material costs – circa £2m per annum – which we will find difficult to fully pass on to our customers. Whatever challenges come with respect to tariff-free access, we’ve decided we’ll have to cross that bridge when we come to it. What-ever we don’t have control of, I can’t worry about. We feel the exchange rate has stabilised at its current level and will remain there for the fore-seeable future. Our European partners will make the separation incredibly difficult and expensive for us as they are terrified that if our exit is too sweet then other nations, who emotionally feel the same way as many Brits, will want to exit the EU as well.”
Q&As
Andy Cook, managing director, FFEI
With the pound at – or near – parity with the euro, have export opportunities for UK companies improved?
Yes, very much so. FFEI generates 95% of its revenues from export and the weak pound has certainly helped our competitiveness on major digital inkjet development projects. That said we have experienced some cost increases for the materials and services we source from abroad. Overall, this year will probably be one of our best in the past five and we are forecasting a strong 2018 based on the high level of tenders and proposals we currently have.
How do current trading conditions stack up against concerns for loss of tariff-free access to European markets?
If we lost tariff free access to Europe that would be a complete disaster for us and most export companies – currency advantages wouldn’t cover this. I hope this is very unlikely due to the impact it would have on everyone, so as it stands, we have to assume this won’t be realised.
Do you expect the pound to recover in the short to medium term? Or even at all?
When comparing sterling against the euro, our assumption is that we have at least several years ahead where the pound remains weak. Obviously we are not currency traders, but with such a weak government and big deficit, I see no reason why the UK economy and currency would suddenly become attractive.
Puneet Gupta, chief operating officer, PG Paper
Is Brexit an opportunity or catastrophe?
The problem is it could be both. I don’t think enough is known at this stage to be able to make an informed decision.
With the pound at – or near – parity with the euro have export opportunities for UK companies improved?
Yes, there are opportunities – and it does open doors potentially.
How do current trading conditions stack up against concerns for loss of tariff-free access to European markets?
Again, it’s too early to tell. It will depend on what the tariff ends up being – if there are tariffs.
Do you expect the pound to recover in the short to medium term? Or even at all?
It will recover when there is more certainty. Fundamentally I believe that we in the UK are in better shape than Europe – and with certainty and confidence the pound will strengthen in the medium-to-long term.
Rob Nicholls, director, Plastic Card Services
With the pound at – or near – parity with the euro have export opportunities for UK companies improved?
Opportunities have improved. The issue, though, for businesses is that there is likely to be additional volatility in the money markets for sterling over at least the next couple of years and nobody really knows what will happen. If exporting is new to you then there is an investment required in terms of time, learning and money. I think a lot of smaller companies take the view that it is not worth the effort and they are best concentrating on what they know, hence the disappointing levels of new exporting given the current opportunity.
How do current trading conditions stack up against concerns for loss of tariff-free access to European markets?
Current trading conditions are relatively straightforward when trading throughout Europe. It is in the interests of both the UK and the EU to come to some arrangement which suits both sides otherwise both parties will be hurt. It does not instill a great deal of confidence when you see posturing on both sides – but mainly the EU – as time ticks on. What is just as important is to ensure that there is not chaos at the ports whatever the result is as this will truly damage business.
Do you expect the pound to recover in the short to medium term? Or even at all?
Sterling and also the economy have defied all expectation. We are living in unchartered territory and given that ‘experts’ have forecast parity with the euro and US dollar we currently see movements in the opposite direction. With the earnings of big business predominantly in US dollars this has skewed the stock markets giving a false perspective. The greater danger I think is a sharp correction in stock markets given the current direction of sterling coupled with the unwinding of monetary stimulus. As a company we do hope for the continuation of the strength in sterling as we purchase raw materials abroad and our export market is strong even without the help of a weakened currency.
Do you think the way the Brexit campaigns were presented were honest and straightforward?
In one word, no! However, what do you expect from all sides during any election campaign? They are as bad as each other and all you need to do in those circumstances is to go with your gut instinct in the end. My greatest concern is that the country, by consensus, has entrusted politicians to implement the will of the people. From what we have seen so far it does not instill a great deal of confidence that they have the skill set to get the best deal for the UK. It does also concern me that this ‘divorce’ is being conducted with the EU setting the terms for the divorce – when would that ever happen, surely it needed a dispassionate third party?
