UK Brexit decision may impact Australian manufacturers’ exports

While Treasurer Scott Morrison’s summation that Brexit is expected to have only a “limited impact” on the Australian economy has been confirmed by a report by financial regulators, the longer term implications for manufacturers marketing products directly into the UK and EU remain to be seen.

The report by the Council of Financial Regulators suggests Australia’s position is stronger than other countries given we trade more with Asia and Europe, but notes the manner in which Britain handles the exit process and how it engages with other nations will impact us over time.

With British Prime Minister Theresa May confirming she won’t be invoking Article 50, which commences the process, until next year, Brexit is likely to be a drawn-out affair making it difficult for Australian manufacturers to predict how they may be affected.

One potential positive is the possibility of Brexit creating the impetus for the formation of a direct free trade agreement between the UK and Australia. Johnson Mathews, International Sales Manager of Rhino Rack Australia, which markets innovative CAD-designed car roof rack systems into Europe and the UK, points out this could lead to increased direct trade between Australia and the UK.

“With the relationship between Europe and the UK likely to change as the result of Brexit, what is going to happen remains to be seen,” Johnson told us. “However a move which leads us to be able to import directly into the UK is likely to be beneficial for us.”

According to Austrade’s analysis of recent Australian Bureau of Statistics export figures, the lower Aussie dollar is encouraging more business into the export market, but this underscores the importance of identifying which export markets are best to target.

As SME export consultancy Exportia managing director Christelle Damiens told Manufacturer’s Monthly’s Brett Balinski in a recent interview, considerations for Australian manufacturers thinking of exporting include making certain there are available resources to ensure the product’s safe arrival and effective marketing, along with the necessary IP protections.

This is where Brexit may well have a longer-term impact especially on manufacturers who currently have EU-wide trademark and design registrations.

A recent article by Baker & McKenzie’s Frank Castiglia in the ANZ Blue Notes newsletter points out that should the UK no longer be part of the EU’s IP regime, Australian businesses marketing into the EU may need additional registrations.

And it’s not just IP registration that’s at issue. There are a range of other regulatory implications, including taxes and tariffs such as import duties to consider. Castiglia argues these could result in higher costs especially for those Australian businesses who import into the EU via the UK.

He cites the practice of Australian businesses ‘passporting’ products throughout the EU by utilising registrations or authorisations obtained in the UK.

With the UK’s departure from the EU, this process may no longer be viable, requiring businesses to instead make separate arrangements for authorisations, registrations and licenses.

An alternative may be for them to create a branch of their business in an EU nation, thereby facilitating trade throughout the rest of the union.

The fact that the UK remains Australia’s top export market in the EU, with more than 30% of goods we export to the EU going through it, highlights its importance as a ‘gateway to Europe’ and the consequent need to expedite the proposed FTA referred to earlier.

Castiglia also emphasises the possibility of regulations, tariffs and customs duties varying between the UK and EU in future and the need for Australian businesses to examine their current EU contractual arrangements with a view to modifying them to ensure ongoing commercial viability while also conforming to UK and EU regulatory requirements.