Plastics firm braced for Brexit impact
9 January 2019
By Jo Davis, Operations Director, Broanmain Plastics
The UK plastics industry is one of the UK’s largest manufacturing sectors, turning over £25.5bn and employing 166,000 people – more than the pharmaceutical, glass, paper, nuclear and steel industries combined. It is also a major global player. With a third of all our plastic and plastics products sent overseas, plastics are one of the UK’s top 10 exports, with a value of £8.2bn. In addition, the UK is the EU’s most important trade partner for manufactured plastic articles .
Know the risks
With this in mind, Broanmain will not be the only UK plastics company bracing itself for the impact of Brexit. The potential problems for our industry are numerous: could labour movement restrictions affect the 18,000 EU workers employed in UK plastics, worsening the current skills crisis? Could legal and regulatory changes hinder our ability to trade freely, especially as 40% of members of the British Plastics Federation are ultimately foreign-owned? And could customs duties and lengthy border delays prevent access to crucial supplies and eat into our profits?
One thing is for certain – without the luxury of a large cashflow to cushion the blows, SMEs like ourselves need to prepare now for our withdrawal from the EU if favourable trade terms are not reached.
Access to raw materials
Larger firms are already stockpiling their raw materials, to enable them to continue operating should their European supply chain be adversely affected. It’s much harder to do that as an SME. We import our plastics granules from Europe – mainly Poland, but also France and Germany – and any delays at the border risk slowing down production, especially as essential supplies such as medical equipment and food will be prioritised.
We have begun to pull orders forward in a bid to counteract this, but that brings its own challenges. Our overtime costs have risen, and it then leaves the possibility of lean times ahead; during which we will of course still need to pay our staff.
Another threat to our profit margin is the fear of import tariffs being introduced. In one sense, we’d be no worse off than any of our competitors, large or small, as everyone would be impacted equally. However, the inevitable outcome would be for companies across the industry to raise their prices.
Furthermore, there is the impact of exchange rate fluctuations, which has been affecting us ever since the Brexit result was announced due to the falling value of the pound. We source our tooling from China and it’s already proving more expensive to do this; a hard Brexit could see sterling further devalued.
Retaining EU workers
Finally, there is concern over the future of EU workers in the UK. Of our 25 employees, nine are EU nationals. Could we be in danger of losing our talented senior manager or injection department manager? Or might we have to pay a premium to keep them?
With the industry facing an unprecedented skills shortage – 92% of plastics companies are ‘concerned’ or ‘very concerned’ about the lack of skills supporting their business – it’s not a matter of simply replacing them with British workers. And with Broanmain undergoing rapid expansion thanks to turnover increasing by 12.9% in just two years, retaining our committed and talented workforce is essential.
Faced with these scenarios, many plastics companies are taking matters into their own hands to Brexit-proof their business – and at Broanmain, we are no exception.
The last 12 months have seen us focus on productivity, to become a leaner and more efficient business, better enabling us to withstand any negative Brexit impacts. We’ve also held meetings with our local MP to point out the risks of Brexit to the plastics industry and encourage him to lobby for greater support from government, particularly for SMEs.
New mass manufacturing facility
Most excitingly, we have developed a brand-new plastics mass manufacturing facility, enabling us to continue fulfilling our customers’ short, just-in-time component production and shipment lead times.
Comprising a fleet of precision injection moulding machines and a dedicated in-house tooling maintenance and assembly workshop, the facility has the capacity to produce in excess of 200,000 components a week. It will be launched at the Southern Manufacturing & Electronics Show (5-7 Feb 2019, stand E145), where our staff will be on hand to discuss the logistics of moving to a moulder that can meet UK manufacturing delivery and mass moulding timescales – no matter what Brexit brings.
For more information, please contact:
Tel: 01306 885888
Fax: 01306 885889