Problems for 3D printing companies from Brexit could be significant.
Brexit, if you haven’t been paying attention, is the process by which the UK will leave the European Union. Today the EU is a vast region comprising an enormous interconnected economy, largely facilitated by the relaxation of tariffs within the community and establishment of standards that all parties can rely upon.
However, for reasons I fail to understand, a number of folks in the UK have decided it best to leave the EU and strike out, as a country, on their own. Through a referendum on the topic the country barely decided to exit the EU a few years ago, but without specification of how or when.
In an attempt to balance the desires of the citizens to leave with the inevitable chaos of abrupt termination of treaty rights, the UK government attempted to negotiate arrangements with the EU to continue trade in more or less the same fashion going forward. However, those negotiations failed to produce an agreement that their government would approve.
Thus the country is facing what’s called a “no-deal” Brexit on October 31st. At that time, barring any alternative developments in the meantime, all treaty rights evaporate at midnight and the UK becomes the same as any other non-EU country, trade-wise.
There are a large number of negative implications to business (and society) of this outcome. I thought it wise to investigate what effects might be imposed on UK and EU businesses involved in 3D printing. To do so I obtained a list of “Key Immediate Impacts” from Burges Salmon, an independent UK law firm. Their list is quite extensive, so let’s go through each item and see what it might mean for 3D printing.
“Political, policy, economic and trade uncertainty will continue until the UK reaches future agreements with the EU and other countries and implements such new legal and regulatory regimes as are considered appropriate. This is likely to impact business planning for 2-10 years.”
This effect is likely to dampen the expectations of sales managers of 3D print companies, particularly service bureaus who may have been looking for increased presence in Europe.
Investment and FDI
“Investment (internal and inward) may be deferred due to uncertainty, relating to the UK’s withdrawal from the EU single market and concerns that there may be a potential short term economic contraction, restricting liquidity. When the trading arrangements between the EU and UK become clearer a wave of investment may be released.”
3D printing companies in the UK may no longer have as easy access to investors based in the EU, who might tend to invest more in EU-based businesses.
“A short term economic contraction (recession) and falls (and volatility) in UK stock markets following Brexit may affect sales and business confidence and investment.”
Customer sales of 3D printed parts could drop, causing a loss of revenue for 3D print service bureaus. This could be very challenging as most bureaus have leases on equipment that they must fulfill. Without revenue, they may face financial challenges.
“The pound is likely to be volatile and (in the short term) may fall substantially. This may make exports more attractive (subject to additional tariffs and administrative and regulatory effects) but cause inflation and increased costs of imports (in addition to tariff, administrative and regulatory effects).”
This may affect companies in both ways. It will make it more difficult for a UK-based company to purchase parts, materials, equipment or other items from any sources, but at the same time their products might be less expensive for others to purchase outside of the UK.
Skills and Staffing
“Reduced EU migration (and emigration of EU citizens currently in UK) may reduce the available workforce and impact skills (including knowledge-led roles). Restrictions on UK citizens working in the EU may affect EU business development for UK businesses. Skills pressures are likely to be especially acute in construction, academia, agriculture, healthcare and seasonal employment.”
It’s not clear what percentage of staff of 3D print companies are EU citizens and not UK citizens. Companies may suddenly see key members of their staff migrate back to the EU, leaving holes in the organization.
“Words of comfort have been given by certain EU member states (such words of comfort are not binding) in relation to the rights of UK citizens who have been living and working in certain member states for a substantial amount of time in advance of exit day. A visa may be required for entry, however it is possible that in the short-term a visa-waiver may be put in place for entry for tourism and short visits.”
This could curtail or diminish the possibility of site visits to the UK, which is quite important for companies learning about 3D printing and need to see things first hand. Why go to the UK from the EU when you need a visa and don’t need one to go to another EU country?
“Existing supply chains may be disrupted. This may include additional cost (from tariffs and administrative, regulatory costs), reduced reliability (due to import/export controls) and extended timings (where border controls are necessary, just in time deliveries may be affected). New supply chains may take time to establish. Some suppliers have begun stock-piling as a mitigation measure for a ‘No Deal’ scenario.”
3D print companies are often literally part of that supply chain. 3D printed parts flow both ways across the (new) border and will be subject to delays and tariffs. The delays are of particular interest because one of the key points in 3D printing is the speed by which parts can be produced.
“Insolvencies and business restructurings are likely to spike as exposed businesses are put under greater economic pressure. This may affect supply chains, customer demand and recoveries.”
Again, this could affect 3D print companies through loss of customer base.
Goodwill and Perception
“Changes to perception of the UK as a nation and place to do business will likely result in a less warm welcome in the EU. In other countries there may be additional suspicion/sceptism of the UK as an independent trading nation. Conversely, some countries may welcome an independent UK brand due to the UK’s release from the EU’s regulatory regimes.”
I think thi
s is a sleeper problem: it could be far worse than imagined, as EU companies might default to non-UK solutions for some time due to Brexit.
“Businesses may relocate to EU or divert business which is currently done in the UK to EU affiliates. This will reduce contracts available in the UK. It may take time to develop alternative business from other sources. Conversely, some businesses may be attracted to establishing in the UK due to the UK being more flexible outside EU tax regimes and regulations.”
This is simply more loss of potential clients, or at the least placing barriers between clients and companies. None of that is good for business.
“Businesses currently using EU tax structures may realign business to maintain positive corporation and sales taxes (as well as tariffs). Alternative UK bespoke tax structures may take time to develop.”
This is a form of paperwork and process change that 3D printing companies could have to undertake. There are likely many similar steps that must be done, most of which is probably unknown to 3D printing companies at this point.
Access to Markets
“Whilst it is expected that in a ‘No Deal’ scenario UK businesses will maintain regulatory alignment with the EU in the short term, UK businesses may be unable or restricted in bidding for or delivering EU contracts due to potential divergence from local or regulatory requirements.”
For 3D printing companies producing high-value 3D printed parts with certifications, this could be a major issue. Some service bureaus make most of their revenue on such prints, and suddenly losing certifications or having to re-certify could be catastrophic.
“Existing contracts may go into dispute/renegotiation where material change or cost is involved. Contracts which are linked to specific delivery or completion dates may be affected by potential border delays and fluctuation provisions may need to be incorporated into contracts. Enforcement in the EU may become harder. Future contracts may come under pressure to incorporate change of law provisions, be under EU law or to incorporate protections for in relation to border issues.”
This will no doubt generate a great deal of expense for additional legal work for 3D printing companies. More expense with little or no revenue gain.
“Business access to customer data may be restricted once the GDPR (Data Protection) evolves as the UK will no longer be required to align with EU legislation if it leaves the EU. Existing databases may have to be reviewed. Data exchange with non-EU countries may become less restricted.”
This is an area that likely will require investigation by each 3D printing company. It could result in legal costs, technical changes to operational systems or even loss of clients.
“Security risks (including cyber-security) may increase due to reduced information sharing with EU members.”
This is a possibility, but perhaps one of the least as compared to those above.
I’m wondering if you feel the same as myself after reading these points: is Brexit good for business? I think not.
Via Burges Salmon