Dawn Of A New Era

AN UNPRECEDENTED PERIOD IN THE POLITICAL HISTORY OF THE UK HAS BEEN TAKING PLACE OVER THE LAST FEW MONTHS, SPARKED OFF ON JUNE 23RD BY A REFERENDUM ON WHETHER TO LEAVE THE EUROPEAN UNION.

Since the result was announced it’s been difficult to keep up with the dramatic events which have been unfolding in the world of politics, at times, on an almost minute-by-minute basis. Following the drama of the result, very few decisions have yet been made about what happens next, and the UK is for the moment, business as usual. Behind the scenes, however, Britain’s engineering organisations are uniting to advise the government on the best course of action to protect industry during the expected negotiations concerning Britain’s exit from the EU. Statements from other trade associations and statistics from a report commissioned by the EEF appear at the end of this article.

Q1. NATURE OF BUSINESS?

52% of the population who voted decided that Britain should leave the European Union. Currently, we have no definitive answers about how and when this process is going to happen, and are unsure of the effect it will have upon the gen set industry in particular, as there are many potential twists and turns which the leave route may take. However, once the dust settled slightly AMPS wanted to conduct a survey among its members to gather reaction to the vote and importantly, to find out in which areas we can best support our members. The time period since the referendum has not been a long enough period to collect hard economic data, therefore, not all answers are factual – we aim to ask similar questions in a year’s time and compare the response.

DAZED AND CONFUSED OR DAYS OF WINE AND ROSES?… WHAT AMPS MEMBERS REALLY THINK ABOUT BREXIT

Q2. NUMBER OF EMPLOYEES IN BUSINESS?

We were extremely pleased with the number of replies we received – obviously a very relevant subject. Thank you to everyone who took the time to give their views and answer questions. The following results represent a cross section of our membership.

• The data collected represented all sections of the AMPS membership with 35.29% of responses coming from control and monitoring and 23.53% coming from gen set manufacturers.
• 30% of respondents employed 11-50 employees with an equal number employing more than 101.
• 64.71% of respondents had 0-25% of annual turnover reliant on exports to the EU while 52.94 had the same percentage of exports to outside the EU.
• 5.88% stated that exports to outside the EU made up 51-75% of the annual turnover.
• Uncertainty around legislation and standards prompted 100% answer with 38% of respondents expressing concerns about this subject and 61% believing that current regulation will continue or improve.
• Access to the EU single market and the ability to develop markets outside the EU were not perceived to be future problems with 75% of replies to both questions remaining positive or not foreseeing any change.

Britain’s engineering organisations are uniting to advise the government…

Q3. WHAT APPROXIMATE % OF YOUR COMPANY’S TURNOVER RELIES ON EXPORTS TO THE EU?

However, the good news is that there is a strong export market to countries outside of the EU, the exports to which, we imagine will not be negatively affected.

Q5. HOW WILL THE FOLLOWING KEY ISSUES AFFECT YOUR FUTURE PLANS?

a) Access to the single EU market: The majority of participants (75%) answered that leaving the EU will make no difference, although there were concerns from a few members that access would be made harder and that customers who may be affected would have a knock on effect.

b) The ability to develop new markets outside the EU: Almost all participants replied that leaving the EU will have no effect on plans to develop new markets outside the EU, although there was caution about how beneficial the reported benefits from the Leave campaign would prove to be in reality. Several companies think that the opportunities will be as good as ever, if not better.

c) Uncertainty surrounding existing legislation and standards: This is the area that has raised the greatest concern and questions among the AMPS membership. A number of members thought that nothing would change, but concerns were raised that leaving the EU may have an adverse impact on an already complicated area.

As can be read in the Technical Committee Blog in this issue there will be no immediate changes to policies or standard making, so business as normal, for the foreseeable future, at least.

A BSI (British Standards Institute) statement said: ‘no change to BSI’s status and obligations as a full member of CEN and CENELEC. We are confident that a UK exit from the EU will not affect BSI’s membership of ISO and IEC. It is business as usual for BSI, including all aspects of our standards making, policy and strategy work.

d) The availability of skilled employees: Responses to this question ranged from one positive reply stating that it would be easier to attract skilled employees, to worries that it maybe tougher and that the companies will have to spend more time and money on training up staff to reach required levels.d) The availability of skilled employees: Responses to d) The availability of skilled employees: Responses to this question ranged from one positive reply stating that it would be easier to attract skilled employees, to worries that it maybe tougher and that the companies will have to spend more time and money on training up staff to reach required levels.this question ranged from one positive reply stating that it would be easier to attract skilled employees, to worries that it maybe tougher and that the companies will have to spend more time and money on training up staff to reach required levels.

75% of companies estimate that there will be no perceived impact, unlike the construction industry who have been reliant on migrant workers from Europe for decades and where currently 12% of the workforce are of non-UK origin.

Brian Berry, Chief Executive of the FMB (Federation of Master Builders) stated the importance of apprenticeships and training, which also applies to our own industry. “That’s why it’s so important that the government gets the funding framework right for apprenticeships – when you consider that this whole policy area is currently in flux, and then you add Brexit into the mix, it’s no exaggeration to say that a few wrong moves by the government could result in the skills crisis becoming a skills catastrophe.”

Answers to this question were more varied with 52.94% of participants stating that exports outside the EU made up 0-25% of their annual turnover, 17.65% with 26-50% and 5.88% with exports of between 51-75% of annual turnover.

23.53% of participants preferred not to answer questions 3 and 4. From these two sets of figures we can surmise that withdrawal from the EU may have a major effect on the export market for a number of our members, dependent upon the trade terms eventually decided.

e) Attracting future investment and financial support: Again, this question gave rise to a variety of answers from AMPS members; from those who don’t think that leaving the EU will stop future investors to those whose opinion is that it will get tougher to attract financial support and investment. Unsurprisingly, the highest concerns are expressed from those members whose parent companies are based outside the UK.

Q6. WHAT IS THE QUESTION OF GREATEST CONCERN THAT YOU WANT ANSWERED WITH REGARD TO BREXIT AND THE GEN SET INDUSTRY?

We asked AMPS members this question in order to provide you with useful information in the specified areas of concern. The main topics about which AMPS members are concerned included:-

• Uncertainty of what will happen in the short, medium and long term
• Wanting to know how leaving the EU will affect changes to interest rates
• Standards
• Health and safety
• Import regimes
• Can the UK still influence gen set standards?

(Other questions about which we are unfortunately unable to provide the answer are ‘was the referendum legal to trigger article 50?’ and ‘When can we rejoin?’) A new series of health and safety articles start in this issue of AMPS Power, and we will also be including an import/export feature in a future publication. Our technical committee, as always, will be keeping the membership up to date with any changes to standards, grid codes and policy. “Keep calm and get the plan sorted!” seems to be sensible current advice from Simon Walford at CAT Marine. Q7. WHAT FEEDBACK OR CONCERNS HAVE YOU RECEIVED FROM YOUR CURRENT CUSTOMERS?

• Business as usual!
• Amazement!
• Leaving the EU – Why did we do it? – We must be mad!
• Pricing

Q8. ANY OTHER COMMENTS?

A selection of replies are printed below.

– Some EU workers leaving as they feel ‘less comfortable’

– Imports will be expensive, lets just buy British

– The Remain campaign lost it by using fear rather than facts

– We would be in a moralistic breach of the United Nations Charter.

Read the preamble. The part about having suffered two world wars in a lifetime, we now agree to work together….

– We look forward to the future

– Even though we design and build many costs of imported components will rise and therefore so will our prices. So Brexit is inflationary

– Definitely keep positive

Political views and opinions about the referendum result vary among our members reflecting the wide range which make up the AMPS membership – what brings AMPS together is the gen set industry, but perhaps the best advice is to definitely keep positive! Let’s hope that ‘The Best is Still to Come’. HEARD IT ON THE GRAPEVINE… THE LOWDOWN ON WHO’S SAYING AND DOING WHAT!

• Quick off the blocks, Sajid Javid, the Secretary of State for Business, Innovation and Skills flew to India at the start of July to start trade talks with the Finance and Commerce and Industry Ministers. He was also due to visit the US, China, Japan and South Korea.
• Reported by the Daily Express, 27 countries around the world want to broker a deal with the UK including Australia, Argentina, Bolivia, Brazil, Canada, Chile, China, Colombia, Ecuador, Germany, Ghana, Iceland, India, Ireland, Japan, Kenya, South Korea, Mexico, New Zealand, Pakistan, Paraguay, Peru, Suriname, Switzerland, the United States, Uruguay and Venezuela.
• Whitehall have taken on 300 trade negotiators to help sort out the deals, although according to the Guardian this will not be nearly enough.
• Being more cautious Simon Evenett, Professor of international trade and economic development at the University of St Gallen, Switzerland, warns against “quickie” trade deals, despite the pressure to demonstrate to voters that Brexit can deliver immediate results. “Meaningful trade deals take a long time to negotiate unless one side rolls over and agrees something which is not really in their interests”, he says, neither does he think it very likely that Britain will simply be allowed to adopt the free trade agreements or World Trade Organisation terms the EU has already negotiated with other

…perhaps the best advice is to definitely keep positive!

parts of the world, which are based upon a much larger market of 500m people. Smaller markets are likely to have tighter concessions imposed upon them.

• The EEF published a report at the end of June called “Manufacturing: Our Future – What next for Britain and the EU” in which they demand that the following priorities for manufacturers should be adhered to by our government when negotiating exit terms. The full report can be downloaded at http://goo.gl/ywVavY An edited list of the Priorities for manufacturers is below:

1. A trade deal with the EU must come first: the European Union is the UK’s biggest export market. It won’t be easy to quickly substitute EU customers for ones in other parts of the world, including emerging markets. Prioritise comprehensive trade agreement with EU partners before pursuing deals with other countries and regions. The Government will need to invest significantly in plugging the skills gap in UK based competence in trade negotiations.
2. Roll over existing trade agreements: the UK has benefitted from Free Trade Agreements agreed between the EU and some 50 partners and we should continue to benefit from these agreements.
3. UK goods exporters must not face tariffs when exporting to the EU: access to the single market in goods is a priority for manufacturers, which are part of integrated supply chains that extend across the EU. Trade must not be impeded by the imposition of tariffs by either party.
4. Recognition of standards: exports of goods subject to rules around product standards, many of which will have been established jointly by the EU. UK goods exports should continue to meet these mutually recognised product standards to support ease of movement of goods across the region.
5. Free trade in services: manufacturers are increasingly deriving revenue and competitive advantage from the provision of services and currently the sector has a trade surplus in services. While few free trade deals currently contain provisions for services, a new agreement with the EU must ensure that UK manufacturers have access to the developing single market in services.

The EEF have also conducted their own post-Brexit survey of UK-based manufactures to see how, if at all, effects were been seen in the real economy. The main messages from this survey are comparable with similar areas covered in our own survey among AMPS members and indicate that

Current trading conditions largely unchanged since the referendum.

But a weaker UK and/or European economy is expected to lead to lower orders in the next six months.

Manufacturers identify multiple risks in the next 12 months, knocking confidence.

Still there are opportunities from a weaker exchange rate and beneficial policy changes. The survey shows that confidence for the 12 months ahead has tumbled. Undoubtedly, this has been driven by the broad range of risks manufacturers have identified for the year ahead. These concerns include

• Exchange rate volatility – a concern for three quarters of manufacturers (75%)
• Political uncertainty (65%)
• Expectations of increased costs (59%)
• Weaker demand (49%).
• 5% of firms have not identified any risks to their business in the year ahead. Brexit may also bring opportunity.
• The weaker pound, with over half of firms (53%) seeing this as an opportunity.

Still there are opportunities from a weaker exchange rate and beneficial policy changes

And finally, comments from heads of two other associations with links to the power and energy industry:

Julia Evans, Chief Executive, BSRIA (Independent building, test, research, instruments and information)

“The decision is ‘out’ and the country has voted. But we now have some very serious questions for government: how do we maintain economic investor confidence? What does this mean for energy efficiency? And how will this impact the skills issue and how we should we address this? Specifically regarding labour – how will the industry access much-needed tradesmen? Industry needs to know answers to the questions! “We also ask government where will direct investment now come from without EU financing and backing? If government is

not going to make any necessary investment – where will it come from? And what of carbon reduction energy policies? Will these still be followed? Industry needs to be reassured and quickly.” Steve Bratt, Group CEO of the Electrical Contractors’ Association (ECA) “The legal situation today is still the same as the legal situation yesterday. We are still in the European Union, and will be for at least the next two years, so the industry needs to focus on its immediate priorities: improving the commercial terms we work with, adapting to and embracing emerging technologies, and ensuring we have a skills base that is fit for the future.