Following the latest rounds in a brewing trade war between the US and the EU, there has been a heightened need for EU-based companies to urgently look to expand their manufacturing capacity in the UK. Last week the US threatened the EU with 50% tariffs, suspended until July 9. However, the UK’s ten per cent tariff rate now makes the UK a very competitive geography for relocating EU manufacturing.
The UK is now well placed to act as a bridge between the US and EU. A recent US tariff agreement and new EU trade deal means the UK can facilitate trade between the two economies. “There’s a risk that many EU companies look at the success of the UK’s tariff renegotiation and assume the EU is close behind. The reality is the EU is still very far from a long-term deal with the US,” said Alex Altmann, Partner and Head of the German desk at chartered accountants and business advisers Lubbock Fine.
Rather than hoping for reduced tariffs on their exports, EU businesses should start building contingencies. Relocating manufacturing to lower tariff regions like the UK will help these companies maintain their output and protect their margins. A lot of EU companies already have spare manufacturing in the UK, they should be bringing that back onstream.
The outflow of manufacturers after Brexit means the UK has surplus capacity. EU businesses can take advantage of the existing infrastructure – like factories, machinery, expertise and logistics networks – getting up and running quickly.
The geographic proximity of the UK to the EU – especially manufacturers in France and Germany – keeps the supply chains short. This is both more cost-effective and resilient against future flare ups over tariffs.
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