Firstly, let me apologise to my many European friends and colleagues. The result of our referendum has come as a severe shock to myself and our organisation. We did not believe for one minute that the outcome of this vote would be an exit from the European Union.

Admittedly, it has taken a long time for the British to come round to the idea of belonging to Europe, or so we thought, evidently we haven't come round to the idea at all. This is perhaps because we are an island nation and not physically attached to the mainland of Europe, so at a psychological level we never saw ourselves as "joined".

Many will take exception to the use of a Jack in the title photograph, but we put it there by way of an explanation for our behaviour. The Jack, and not the "Union Jack" was a navel flag flown by the royal Navy, which to history buffs will remind people that we are, in our history, the following; a trading nation, and the first nation to have a navy to protect our national interests and trading routes. We are, and have always been a trading nation. Our participation in the EU was always an idealistic sentiment founded on the need to secure "peace in our time" and never really, adequately dealt with our need for international trade. We are still the 7th largest manufacturer in the world and the 5th largest economy in the world.  We are the 78th smallest country in the world by land mass and the 21st largest country by population. According to the IMF a few years ago, Britain was destined to be the largest economy in the world in the next 20 years.

There will be a lot of hand-wringing over the coming months as people come to terms with the changes we are embarking upon. Much of that worry is simply a reaction to change; let's face it, we had it easy in the EU, so why put ourselves through all of this? But the facts are as follows:

  1. We have one of the largest banking systems in the world and certainly the most efficient, which means that fiscal arbitration of the exit will be swift and efficient.
  2. We have an enormous amount of IP (Intellectual property) in the country and some of the finest universities and research in the world.
  3. We have a large, educated and relatively cheap workforce and an efficient and dynamic manufacturing base.
  4. We are as a nation, at our heart, innovative, we like to solve problems.
  5. We have our own trading block still in place in the form of the Commonwealth.
  6. We still have our own currency, which at one time was the global standard for trade, and therefore is perceived as a strong and reliable currency.
  7. We have English Law, which is the foundation of trade Law and the defacto standard for International trade around the world.
  8. And, finally, not necessarily proudly, we are a small insular island filled with people that actually like to suffer together. We pull together in hardship and our sometimes xenophobic pride means that we are at our heart a very effective national team. Brexit will restore pride and identity to the general population of England, who for many years have suffered an identity crisis.
So to my friends abroad, who are looking in on this apparent debacle, fear not, the phones will soon start to ring, as we once again become an exporting and trading nation. There is no better place on this earth for you to bring your manufacturing investments, there is no better place in the world to bank. We are, as a nation, very open for business and we look forward to doing business with you soon.

 
 
It is becoming abundantly clear from conversations we are having with manufacturing in the UK, that the governments legislation to increase the minimum working wage every year upto 2020 is having a dramatic effect on the strategies of large manufacturing companies.

We have been a proponent of automation for many years, but the large capital investments and the lack of flexibility that these investments had, made the conversations difficult to have. In one move, the government has opened the doors to all of these conversations in the UK. The truth is that any manufacturing business that requires large numbers of shop floor employees will not survive in their current state unless they automate. 

The implications of this are huge. Strategically this forces manufacturers to specialise and focus on volume. These two elements are fundamental to the payback equation needed for inward investment. Having spent much of the last 5 years pulling investment cases together for manufacturers, We can honestly say that volume and scale are the 2 key ingredients for pulling together a successful CAPEX.

Neither the supply chain, nor many of the actors within have yet to fully understand the implications of this new legislation and as a result there are a large number of manufacturing businesses which are slowly drowning through complexity, low volumes, low margins and increasing fixed costs. The truth for many of these manufacturers is that they should have moved 15 years ago in terms of inward investment and commitment to the new models required for survival, and for many of them now, without substantial investment which will require equity release, there is no hope.

There are however options for these companies. Many of them can benefit from disaggregated business models and diversification, but this requires a radical shift in strategy and often a large pot of working capital to implement. There are options out there, but the longer they wait, the fewer those options will be.