The Brexit battles26 May 2017
A year on from the United Kingdom’s decision to leave the European Union, there is not a day where Brexit doesn’t dominate news headlines. Since the somewhat unexpected ‘Leave’ result on 23 June, 2016, UK prime minister Theresa May has triggered Article 50 in March 2017, starting two years of negotiations. She also called a snap election for 8 June and in unveiling the Tory manifesto she said Britain would face “dire consequences” if it does not secure a clean departure from the EU, adding that if her party won – which, as PSNEurope goes to press, seems likely – that the Government would “not seek to fudge this issue – to be half-in and half-out of the EU”. She committed the Tories to taking Britain completely out of both the single market and the customs’ union, and cutting net immigration into the UK to fewer than 100,000 a year. She added that securing the best deal for Britain outside the EU was the single most important challenge facing her Government over the next five years
Of those companies operating in the pro-audio industry that were canvassed by PSNEurope, pricing – both negatively and positively – has been the major impact since the vote to Brexit. And while some continue to be concerned over the uncertainty surrounding negotiations and the final form of Brexit, others have the attitude that it’s best just to get on with things.
The pound has endured a bumpy ride since the EU referendum, falling dramatically after the vote, and since then has been trading around 15 per cent lower compared to the dollar and 12 per cent lower compared to the euro.
David Bruml (pictured), sales director at Funktion-One, the UK loudspeaker designer and manufacturer based in Surrey, says since the Brexit decision, there has been clear inflationary pressure on pricing, due to the weakened pound, and this has primarily affected the importation of goods into the UK.
“We have seen some of our suppliers increasing their pricing as a result. As our products are all made in England, the impact hasn’t been as significant as if we were importing finished products from outside the UK. We have bided our time and haven’t increased prices as much as many of our competitors, but higher costs do seem unavoidable,” he explains.
But in terms of export, the weakened pound works in favour of Funktion-One’s international customers, which balances any increase in costs here, adds Bruml. “As our technology is market leading, the political changes aren’t really influencing those who seek the best sound for their venues or events, so Funktion-One’s growth continues despite the uncertainty caused by Brexit and the subsequent negotiations,” he adds. “We are supporting our customers by keeping any price increases to a minimum. We obviously continue to monitor developments closely, but we’re taking a considered approach.”
RH Consulting co-founder Roland Hemming, who was a ‘remain’ voter, says the company has been affected both positively and negatively by currency fluctuations, but it has been implementing some practical changes for the future. “We have opened a bank account in another EU country so that we have the option of an EU-based subsidiary in the event of trade becoming more difficult,” he says. “We have also opened up aeEuro account in the UK to accompany our Sterling account and we have also converted our accounts system to be multi-currency.”
An immediate impact after the vote for John Merriman (pictured far right), co-owner of Crown Lane Studios in Morden, London, was a project being cancelled, but luckily he says that has been a one-off – so far. “As yet no other implications of the Brexit negotiations have been noticed on a day-to-day basis, other than stock costs increasing – which can’t be proven to be a directly linked correlation to Brexit,” he says.
Firmly in the leave camp, Chris Scott, MD of Nottinghamshire-based pro-audio and premium integrated systems developer Inspired Audio, says Brexit has had little to no effect on the company. “We have concluded distribution deals in Singapore and South Korea, where the low pound will be a help, but in honesty I think these arrangements would have happened anyway,” he observes. “The cost of components bought in the EU have risen, but not to a level that has instigated any price rises. Being more attractive outside Europe due to a lower valued pound has certainly offset anything negative from European purchasing.”
However, their sister company that deals in the retail market has seen price instability from suppliers – much of it out of synch with sterling value and perhaps more speculative than based in reality, he adds.
Medialease managing director Paul Robson agrees with Scott that the decision to Brexit has had no impact.
“We have seen a 20 per cent increase in import pricing since 29 June and a big drop in the value of sterling… Yet this has had no effect on UK companies buying foreign goods – without changing anything we do as a finance co, Medialease just went from £20m to £35m in a year and it’s thanks to loyal returning customers and suppliers that enabled the opportunity for us – so stop all your moaning and despondency,” he exclaims (originally, in a posting to Facebook). “This is your opportunity to make something of the year ahead and face challenges if and when they appear – please don’t make challenges and obstacles that aren’t there. I don’t see anything but a positive future and am going to grow this company further despite all the negative [mainstream] press [about Brexit].”
For Merriman, he feels smaller businesses like his – Crown Lane has a double room studio, plus a rehearsal and recording room and edit suite – remain powerless during the negotiations. “The time-consuming nature of creating a deal that will be accepted by the other EU nations means less focus on areas like the arts here in the UK,” he says.
He believes compromises in negotiations are at risk of harshly affecting industries like the arts too. “Results from the music and arts sector are harder to quantify than the financial industries for example, and being more fragmented, there is not a unified voice representing the arts,” he says.
Merriman would like the government to consider what kind of society they are aiming for post-Brexit, and to subsequently ensure the negotiations don’t jeopardise these areas. “Currently negotiating seems to be concerned solely with financial issues and immigration; both important, but could distract from what culture will be lost in the process,” he adds.
In an ideal world, Bruml says Funktion-One would like trading to remain as close as possible to what it was before the EU referendum, although this seems unlikely considering May’s pledge in her election manifesto. “The free trade through the single market, which we have enjoyed within Europe for many years, and the trade agreements between the EU and countries such as Egypt, Turkey, Lebanon, Israel and South Korea have certainly been beneficial for export,” he comments. “We do not want to see increased tariffs or bureaucracy because of Brexit, but it seems that international trade will not be as simple in the future as it is now.”
But Scott (pictured) supports May in her push for a hard Brexit, adding that uncertainty during negotiations is having absolutely no effect. “You can either bluster on about instability, or simply get on with it, which is what we will be doing at Inspired. Personally, I would be looking for a hard Brexit to ensure that we have freedom to conduct free trade deals, which remaining in the single market or customs house would preclude,” he says. “If we are coming out then that is what we should be doing, a halfway house is no solution and the EU have far more to lose from not concluding a free trade deal than we do. Ultimately, they will have to come to the table and talk sense.”
But Karel De Piere, CEO of FACE (Foundation For Audiovisual Commerce & Engineering), which has offices in Belgium, the Netherlands and Germany and offers services throughout Europe, says the biggest issue with Brexit is that nobody really knows what it means. “How will it work, what will exactly change, when will changes be effective? A clear example of the ‘sloganesque’ times we currently live in. Let’s not get to the bottom of it, but let’s act under single digit simplified statements, as long it makes people believe the solution is fast and easy,” he says.
Business-wise it will only make trading more complex, more costly and restrict freedom of exchanging goods and services, asserts De Piere. “If you close your doors for strangers or different influences, you consequently also close your exit road to get out, to export and to share your own knowledge. If you fail to handle differentiation and changes, protectionism will slow down your fall but won’t break it,” he says.
Despite Bruml’s hope for the UK to operate as much like it did when it was part of the EU, he is realistic about the potential consequences once Brexit is complete. “An increase in ‘red tape’ as a result of Brexit seems certain to impact our dealings with Europe. It’s hard to see any positives flowing from this decision,” he says.
De Piere (pictured) remains optimistic despite saying business will become more difficult for FACE in the UK. “But we also trade with other more isolated countries close by and we will make it work both for import and export. There is simply still too much beauty in the UK to give in to a ruthless Brexit. We have always been very positive about the business with the UK and as “harder the Brexit” goes, the harder we will push to keep the doors open or we just will find another door,” he exclaims.
As part of his audio and AV consultancy business, Hemming sits on a European standards committee and says with a good deal of certainty that standards won’t change. But he has plenty of longer-term concerns about Brexit. “Whether we can attract foreign workers? Whether there are special deals for some industries: healthcare or car manufacturing, but I’m sure the audio industry won’t be considered a special case,” he says.
Merriman is concerned about the message the UK is sending to the world. “As a studio focusing on world music, jazz and folk, my hope is that Brexit doesn’t make the UK appear as a closed door to unity and to other cultures,” he says. “As an example, we have a popular twice weekly drum school run by an Eastern European, who says for her and her friends, it’s more about a perception of rejection. It makes it harder for her to feel like her contribution to our society is valued and appreciated.”
De Piere also wonders how Brexit voters are feeling with the perceptions and impacts the decision has created. “Are they happy with seeing global companies transferring step by step companies and jobs to mainland Europe? Are they happy their villas in Europe costing them much more then they anticipated? That travelling abroad suddenly became so expensive? Are they happy with the new image Brexit is creating for the nation?” he asks. “The higher echelon English rich population will easily overcome this but what about the middle class, not to mention normal working class…”
The very real personal ramifications are also reverberating on Hemming (and millions of others) as his wife is Dutch and his eldest son is 17. “My son cannot apply for residency because my wife cannot yet because she hasn’t always worked. By the time she qualifies for residency our son will be 18 and won’t qualify to remain here as he will just be a Dutch adult applying to live in the UK,” he explains. “It is this sort of uncertainty and (so far considerable legal) cost that may have a bigger impact than anything. People like us may be forced to leave the UK just so we can remain a family.”
The EU’s chief negotiator, Michel Barnier, has pencilled in 19 June for the first formal day of talks with Britain about its withdrawal, with any future trade deals not expected to be discussed until December 2017.