UK manufacturing post-Brexit: global possibilities
Amongst all the political posturing, it has been hard for UK and international manufacturers to understand what Brexit actually means for trading and investment in the UK. Graham Carberry, Partner at Livingstone, explores the immediate and long-term implications.
The sky hasn’t fallen
So far, Brexit is having less impact on UK manufacturing than on other sectors, for a clutch of reasons. First, the decline in the value of sterling has made UK exporters immediately more cost-competitive. While this has been tempered by the rising cost of raw materials coming from outside the UK, the overall impact has been resoundingly positive for many.
Second, while there are concerns about future trading terms with Europe, nothing has happened yet and there is increasing recognition that the UK is a significant net importer of manufactured goods from the mainland. Therefore it seems less likely that the EU will seek tariffs in this area than in sectors such as Financial Services.
Third, the UK has been on a path of reducing dependency on European trade for some time. This, coupled with the sluggish growth across the EU may mean that Brexit causes the UK to accelerate its focus on global markets and should therefore derail few manufacturers’ international growth strategies.
Finally, and most pertinently, beyond Brexit the UK could possess a far greater ability to invest in and support key technical manufacturing industries (without running into state-aid issues) and greater flexibility in certain areas of tax; for example the UK would almost certainly not have had as many issues with the role of subsidies such as the R&D ‘patent box’ or the role of Venture Capital Trust outside of the EU.
Not without risk
Beyond possible future levies, the most obvious potential Brexit concerns for UK manufacturers relate to regulation and labour. We currently benefit from standardised regulation of many manufactured goods, which significantly reduces the risk and administrative process around getting new products approved for multiple markets. Were our standards and those of the EU to diverge following Brexit, this could impact the UK innovation environment by increasing the cost and the time scales for new product launches.
Similarly, many UK manufacturing industries benefit from both foreign labour and the ability to move skilled staff into emerging EU countries to launch manufacturing and sale sites. Any restrictions in the availability of skilled or highly skilled personnel will act as a drag on productivity, arguably UK manufacturing’s biggest current issue.
Another issue that has already raised its head is the position of international manufacturers who have invested in the UK as a platform for Europe. Should the EU seek a levy for UK-made cars, the position of Toyota, Nissan and Honda for example could be impacted. Each of these companies is a major UK employer and 80 percent of units manufactured at these sites go to the EU, with no non-EU exports, so the issue is real for them. However, other UK automotive marques are global suppliers and even Japanese Original Equipment Manufacturers (OEMs) would find any decision to move production extremely difficult due to the capital cost of doing so, as well as the significant and potentially politicised impact on sales in the UK, which remains Europe’s largest market for new cars.
Business as usual?
It isn’t quite business as usual for the UK manufacturing sector, but M&A and investment within and into the sector has far from dried up. Within our own practice we continue to see strong interest in investing in UK manufacturing from both major global corporations and domestic and international private equity investors. The recent acquisition of Nu Instruments by NYSE-listed AMETEK, Inc. is an excellent example of this trend since Brexit. Nu manufactures state of the art magnetic sector mass spectrometers and the purchase by AMETEK will significantly enhance Nu’s ability to sell their industry-leading instrumentation globally.
Furthermore, the Markit/Cips survey which was released in the month after the vote actually saw the joint biggest monthly increase in industry’s performance in the 25-year history of the purchasing managers’ index (PMI), taking it to its highest level since October 2015. Even more recently, September’s results found UK Manufacturing rose to the highest level since mid 2014.
Indeed, the UK may not necessarily see Brexit as either the main challenge or opportunity for manufacturing over the next few years. Trade deals will work themselves out and while UK may lose some ease of trade with the EU, this will be balanced by gaining some domestic flexibility to optimise the business environment. Neither will fundamentally decide the success of the UK manufacturing sector.
Alongside technological convergence, new manufacturing and automation technologies are emerging and global demand for high performance manufactured products is growing. The UK’s Intellectual Property (IP) development, productivity enhancement and development of the key skills required to adopt and utilise these technologies effectively, will remain the primary challenge and the key to the future success of UK manufacturing.
Graham Carberry is a Partner at Livingstone
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Ultium Cells LLC/Li-Cycle: Sustainable Battery Manufacturing
Ultium Cells LLC - a joint venture between General Motors and LG Energy Solutions - has announced its latest collaboration with Li-Cycle. Joining forces the two have set ambitions to expand recycling in North America, recycling up to 100% of the scrap materials in battery cell manufacturing
What is Ultium Cells LLC?
Announcing their partnership in December 2019, General Motors (GM) and LG Energy Solutions established Ultium Cells LLC with a mission to “ensure excellence of Battery Cell Manufacturing through implementation of best practices from each company to contribute [to the] expansion of a Zero Emission propulsion on a global scale.”
Who is Li-Cycle?
Founded in 2016, Li-Cycle leverages innovative solutions to address emerging and urgent challenges around the world.
As the use of Lithium-ion rechargeable batteries in automotive, industrial energy storage, and consumer electronic applications rises, Li-Cycle believes that “the world needs improved technology and supply chain innovations to better recycle these batteries, while also meeting the rapidly growing demand for critical and scarce battery-grade materials.”
Why are Ultium Cells LLC and Li-Cycle join forces?
By joining forces to expand the recycling of scrap materials in battery cell manufacturing in North America, the new recycling process will allow Ultium Cells LLC to recycle cobalt, nickel, lithium, graphite, copper, manganese and aluminum.
“95% of these materials can be used in the production of new batteries or for adjacent industries,” says GM, who explains that the new hydrometallurgical process emits 30% less greenhouse gases (GHGs) than traditional processes, minimising the environmental impact. Use of this process will begin later in the year (2021).
"Our combined efforts with Ultium Cells will be instrumental in redirecting battery manufacturing scrap from landfills and returning a substantial amount of valuable battery-grade materials back into the battery supply chain. This partnership is a critical step forward in advancing our proven lithium-ion resource recovery technology as a more sustainable alternative to mining, " said Ajay Kochhar, President, CEO and co-founder of Li-Cycle.
"GM's zero-waste initiative aims to divert more than 90% of its manufacturing waste from landfills and incineration globally by 2025. Now, we're going to work closely with Ultium Cells and Li-Cycle to help the industry get even better use out of the materials,” added Ken Morris, Vice President of Electric and Autonomous Vehicles, GM.
Since 2013, GM has recycled or reused 100% of the battery packs it has received from customers, with most current GM EVs repaired with refurbished packs.
"We strive to make more with less waste and energy expended. This is a crucial step in improving the sustainability of our components and manufacturing processes,” concluded Thomas Gallagher, Chief Operating Officer, Ultium Cells LLC.