June 24, 2016

Mass. manufacturers brace for Brexit impact

Kinefac Corp. employee Roger Harpin works on a Kine-Spin centrifugal cleaning machine. The Worcester manufacturer exports these machines, as well as metal formers and coilers.

Massachusetts manufacturers are bracing for increased exporting difficulties the British exit from the European Union could have on Bay State exports.

"In the short term, I would immediately be concerned about the fall in the [British currency] pound… It has already been a problem for some of the companies I work with," said Julia Dvorko, Central Massachusetts regional director for the Massachusetts Export Center. "America's products will be more expensive and already have been more expensive. So for our small to medium manufacturers that do not have operations overseas, this is a real problem."

The vote for Britain to leave the European Union took place Thursday, with the country voting 51.9 percent in favor of leaving the other 27 countries that make up the union of nations.

According to Clark University political science Professor Michael Butler, the vote shouldn't come as too much of a surprise in light of British attitudes that have been long skeptical of the EU.

"Combining that with the negative associations of elites, economic insecurity and immigration in the populist rhetoric ascendant in the UK -- not unlike that in the U.S. -- pretty much explains the outcome. What really bears watching is the aftermath," Butler said in a statement.

It is exactly that aftermath that Central Massachusetts is bracing for, with Massachusetts Manufacturing Extension Partnership (MassMEP) President and CEO Jack Healy saying that a strong dollar has already been a difficulty for manufacturers looking to export. It will continue to be a difficulty for the $27 billion in exports the state has, he said.

"It's going to effect us all because the dollar is going up… When you are trying to sell your products, it is going to put you further behind," Healy said.

Dvorko said manufacturers have already expressed concerns with the falling pound prior to the vote, and in the short term she saw this becoming a more pressing issue. This is less of an issue for manufacturers with a niche product, she said, but general manufacturers will be at a disadvantage as the U.S. dollar gets comparatively stronger.

However, in the long term, she said this could impinge manufacturers entry into the European market as a whole.

For many manufacturers, Britain has served as an obvious entry to the greater European market with its close physical proximity and shared language and customs. Now companies will have to evaluate how they choose to enter the market, especially as Britain will now be free to create its own regulations.

"In the longer term, it very much will depend on what kind of agreement they will reach with the EU on the common market," Dvorko said.

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