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Brexit and the Black Country: two manufacturers navigate a new world

Before the referendum the Observer spoke to two Midlands manufacturers on either side of the Brexit debate. More than three months later the economic news is better than had been forecast, but the pound has tumbled. Here they report back on how the decision to leave has affected their Black Country businesses so far.

The Leaver

Andrew Cox and most of his 25-strong workforce voted to leave. He wanted the UK to free itself from the constraints of EU membership and look further afield for export opportunities.

Cox has just returned from trade shows in Poland where, between heated discussions with Polish friends over the UK’s future, he has been taking a flurry of inquiries from potential clients. The pound is a big factor in that jump in demand. His company, Cox & Plant, makes 70% of its £7m annual turnover from exports. From a factory in Lye, it sells production-line machinery to food manufacturers around the world and the drop in sterling since the Brexit vote has just made that machinery a whole lot cheaper.

“The volume of inquiries and quotations has gone through the roof. We have had three orders from America since the middle of August, all based on the fact that the pound is slumping against the dollar,” says Cox.

The pound’s drop against the euro is similarly helpful. “In Poland, one of the guys said to me, ‘this is the easiest 15% discount I have ever negotiated’.”

The domestic market is also improving. “Initially, there was almost paralysis in the sector,” says Cox. “But the home market has been very, very buoyant in the last seven weeks because the data started to filter through, people became more confident and people weren’t going to the wall – and we didn’t get Armageddon as forecast.”

The company buys a small proportion of its raw materials, such as stainless steel, from abroad and such imports have become more expensive with the pound’s fall. But for Cox, the upsides of the weak pound have more than offset the downsides. Investment and hiring plans are on track.

With the pound so low, Cox believes more UK businesses should be looking to increase exports. But in his experience as board director for exports on the Black Country local enterprise partnership (LEP), many companies lack the confidence to broach new markets and the government is not giving them enough support. “The Department for International Trade needs massive investment and it needs troops on the ground,” he says.

As for what he wants from Brexit, Cox wants easy market access to continue: “The worst scenario for me would be to go back to the nightmare paper trails that we used to have to do with exporting to Europe.”

On immigration, he worries politicians could push for rules that hamper the UK. “I just hope things don’t get silly … We have got some great talent in the UK and we’ve got some great talent coming into the UK.”


Cox and Winfield are both suffering from higher import costs, but to significantly differing degrees. Photograph: Andrew Fox for the Observer

The Remainer

Simon Winfield runs MacLellan Rubber, a 145-year-old business in Wednesfield supplying products such as seals and rubber matting to other manufacturers. He felt remaining in the EU and its market of 500 million people was the better option for his business, for the UK economy and for younger generations. Having digested the shock of the vote, he says things remain “very tough”.

Like Cox’s business, MacLellan has seen some boost to exports from the weak pound. But overseas sales are only around 30% of the company’s £2.8m in annual sales. The larger, domestic part of the business has been dented by uncertainty among clients and the pound’s fall. The company imports raw materials such as plastics and rubber from Malaysia, China and other countries and pays for them in dollars. “In effect we’ve had a 15% increase in our material costs which we are struggling to pass on to our customers,” says Winfield.

The company’s premium products are less sensitive to the pound and are higher margin, so that has cushioned some of the blow from costlier imports.Stronger demand from mainland Europe has also helped. “But that has not offset that downturn in the UK yet,” adds Winfield.

His business in the UK depends on other manufacturers upgrading or expanding their plants and so his order book offers early clues on the sector’s health. Right now, people are putting off decisions, he says. “They are just waiting to see is the demand still there, do they need to invest elsewhere.”

He also hopes the UK will retain easy access to export markets. “If there are 15 pages of documents you have got to get stamped at the local chamber of commerce and we’ve got to be filling in additional paperwork, that will just hamper us immensely.”

But overall he tries to strike an optimistic tone. The company, which employs 15 people, is launching new products and looking for ways to replace any lost business, and Winfield feels others are doing the same.

“I am a true believer in the British grit to get out there and do a great job and overcome issues, which is what I see happening at the moment.”

BOSSES’ BREXIT VIEWS


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