The British Prime Minister, David Cameron, has promised a referendum on Britain’s membership of the European Union by 2017 (after the next general election). The Confederation of British Industry has argued that staying in the EU is overwhelmingly favourable for business; a view shared by the PM. Despite this, the issue has divided business leaders and spelled uncertainty for investors in UK-based global industries at a time when economic recovery and growth is crucial. In this interview, Matthew Beecham spoke with Jon Blaze, Head of Recruitment Operations at Jonathan Lee Recruitment, a leading specialist engineering recruitment consultancy. He gave an insight as to the impact that this change could have on the automotive jobs market.
What is the general mood towards the referendum within the automotive engineering industry and workforce?
Go deeper with GlobalData
No member state has ever left the European Union, but since 2010, there have been several UK public opinion polls favouring a British withdrawal. That peaked in 2012 at 56 percent wanting to leave the EU, compared to 30 percent who wanted to remain. That said, the automotive engineering community has a bigger stake in the situation than most. Almost all major employers in the industry are global businesses that export products internationally, and they rely on the free movement of talented engineers and technicians around the EU to develop, test and produce new products.
Several major OEMs have already voiced fierce opposition to the idea, and talk of these companies moving base to remaining EU nations will be a serious concern for everyone involved both directly, and as a supplier. While the public vote will decide the referendum, business will feel its first impacts, and any negative change will have an effect on the jobs market. One major OEM that doesn’t even directly manufacture vehicles in the UK still employs nearly 15,000 people in the UK supplying parts to their mainland operations, and they impact a further 100,000 supplier and dealer jobs.
The picture for the supply chain is similar. Most suppliers are global industries that export EU wide as well, but even smaller businesses that trade locally are strongly affected. On one hand, some surveys have indicated that small businesses are more amenable to a withdrawal as they don’t get the same benefits of the free trade area, but are still affected by restrictive regulations. There is also a fear that struggling countries like Greece could drag the EU back into recession, but despite all of that more than a third of those surveyed said that they did not want to quit the EU, with fears of isolation and a loss of competitiveness on the global market being primary concerns.
Within our sector, that view will likely be amplified. The supply chain is almost entirely dependent on large global manufacturers as ultimate clients, and a withdrawal from the EU free trade zone, coupled with large manufacturers moving to the mainland would impact suppliers at all levels very heavily with all of the downsides of the loss of free trading being felt full force.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataHow does the automotive industry benefit from skills migration within the EU?
Freedom of workforce movement is a major factor in the equation. Business thrives on a broad resource of talent and knowledge, which is best served through open borders and the free movement of people. Britain would gain full control of its own borders as well as the rules by which it trades with the rest of the world, but its engineers might find it harder to get work abroad.
Free trade allows OEMs to source labour, parts and services from the most appropriate places, based on a mixture of quality and cost, within the EU without any restriction. There is access to a broader talent pool, and the freedom to export to the EU without further taxation keeps product retail costs down which in turn helps sales. Good sales mean more jobs.
British engineers are in high demand globally, but countries like Germany and France have enormous and established automotive industries and as a result excellent talent pools as well. While getting the right staff locally might take some time and expense as companies compete to attract workers from other manufacturers, the benefits of the economic union will ultimately far outweigh those costs in the long run.
What is the implication for OEMs?
The UK has a very strong automotive industry at the moment, with major manufacturing plants for Nissan, BMW, Jaguar Land Rover, Toyota and many more being present, as well as several major international suppliers. The problem for OEMs is that import and export duties outside of a free market area are prohibitive, but so is moving an entire production facility.
Finding a location and building a plant would be challenging in itself, but the interruption to production and the cost of transferring everything from one plant to another would be astronomical. The ultimate hurdle however would be sourcing the right staff, and while countries like Germany, France and Spain have excellent talent pools, most of these engineers and skilled technicians will already be employed. Sourcing staff for a whole new facility, whilst competing with several other companies potentially looking to do the same, will be nearly impossible.
While some of the existing British staff might be amenable to relocation, there will still be a huge number of vacancies that will need to be filled. There might also be a requirement for immigration visas and work permits, and the extra paperwork and delay could deter employers and employees alike. Basically, the companies would be stuck between a rock and a hard place until product lines being created in the UK are phased out, which could take several years, and at that point most manufacturing could be based in the EU.
Will this have the same level of effect on the supply chain?
The supply chain relies on the same international pool of engineers and technicians as OEMs. Most suppliers are international companies that might also consider following some of the major OEMs talking about leaving the UK entirely. Ultimately the two industries are so closely linked that they are guaranteed to affect each other. There will also be an increase in the competition to attract engineering staff across all sectors of the industry, which in turn could increase staffing costs.
Would EU industries be affected by a UK withdrawal?
Industries that are already located in the EU would suffer from reduced access to the talented engineers that the UK produces, as well as increased costs of sourcing materials and products from any suppliers that remain in the UK. We don’t believe that the impact would be as great on that front, but there would be increased costs for any vehicles then exported back to the UK, and that is still a considerable number.
Many of the pro-leaving arguments rest on setting up a commonwealth free trade area, and the potential of setting up independent free trade agreements with EU members. Does this solve all of the problems as far as the automotive industry is concerned?
The commonwealth solution is not going to provide enough benefits on its own to offset the loss of an EU market as exports to India, Canada etc do not match the numbers we see going to Spain, Germany and France. A number of individual EU agreements could alleviate the export cost issues, but free trade and freedom of worker movement are not necessarily linked.
To ensure that companies in the UK still have access to skilled engineers and technicians from the EU, and that UK engineers can apply their skills abroad, there would have to be specific arrangements governing work permits and visas. Either way, both of these aspects would have to be achieved with every major EU nation and that would not be an easy task. The EU commissioner has already indicated opposition to a free trade agreement, and Germany has supported her views. With Germany being a significant source and destination for engineering staff, that would be a major hurdle. What we can say is that there is a good chance that the UK’s competitiveness as a destination for future facilities would be seriously undermined, and even over the next two years while we await the referendum, we could face losing out as companies fear the uncertainty and delay long term investment plans.
