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Brexit is no monster to European market
Source:    Author:By Andy Lau & Zhang Jian Ling    Date:26.Sep.2016

So the UK people have voted to exit the European Union. While it is a decision that will transform the nation and Europe, “Brexit”, in the short and medium term, is not expected to have a strong impact on the plastics and rubber industry.

 

It is too early to predict what kind of influence Brexit would have at the moment, according to Philip Law, Director-General of British Plastics Federation (BPF).

 

What the terms would be if we exit the EU? Equally it is not clear when will that happen, or indeed, if it is some time away, what kind of EU we will be leaving,” he said.

 

Austria-based battenfeld-cincinnati shared the same view as BPF. “I think we will have to wait a few months and see the next steps taken by the British government and start of negotiations for withdrawal with the EU, before we can determine the effects on the European plastics industry and individual companies,” said Head of Marketing Judith Lebic.

 

VDMA: UK remains an important partner

 

VDMA Germany Plastics and Rubber Machinery Association noted that the UK is an important market, which ranked 7th among its export destinations in 2015.

 

The industry has traditionally had close ties with the British plastics and rubber industry,” emphasized Thorsten Kühmann, the Association’s Managing Director. “Many of our members have branches in the UK. These close ties between our UK partners and the continent will not change.”

 

Chinese processors unfazed

 

Ma Zhanfeng, Secretary General of China Plastics Processing Industry Association (CPPIA), believed the Brexit impact is minimal, at least to China. “Our trade relationship with the UK will not change because of Brexit, which mainly affects countries in the European Union. It has no significant impact on the Chinese plastics and rubber industry.”

 

The UK is never a major market of plastics manufacturing or plastic products. It is neither a strong supplier of plastics raw materials and equipment for China,” added Fu An, President of Guangdong Plastics Industry Association.

 

UK plastics companies’ have rarely invested in China. An even fewer number of Chinese firms have invested in the UK. Therefore, Brexit would have limited influence on the trade relationship of both sides, he noted.

 

BPF survey: cautiously optimistic

 

BPF’s latest Business Conditions Survey which was conducted for June/July – shortly after the result of the EU referendum vote – showed that despite the uncertainty, over half of the companies surveyed were predicting an increase in sales turnover. This is down from 63% in the previous survey but is nowhere near the 8% seen in January 2009 during the recent recession.

 

Companies were more cautious in their predictions on profitability, with only 20% predicting an increase (down from 32% in the previous survey), with many companies citing exchange rates and the subsequent impact on raw material prices as a reason. Despite these factors, more than half of those surveyed were predicting that their profitability would stay the same.

 

When asked about investment intentions, 27% stated that they plan to invest significantly (down from 38% six months ago). However, only 13% stated that they planned not to invest at all, with the majority of firms (63%) stating that the plan to “invest a little”. This shows that, despite the uncertain business environment, there is no sign that companies are going to stop investing in plant and equipment.

 

Ineos Oxide kicked off a multi-million pound expansion project following the referendum as a vote of confidence in the UK economy. The company will increase the capacity of ethyl acetate (EtAc) at its Hull, the UK manufacturing facility by 100,000 tons per year.

 

Jim Ratcliffe, Ineos Founder and Chairman, said, “We believe in British manufacturing and will support it wherever we can. Our Hull plant is at capacity and this extra investment will enable us to significantly increase production that we will sell all over Europe and across the world.”

 

Plastics Information Europe (PIE) and its German sister publication Kunststoff Information have also done a survey regarding the Brexit decision. About 53% of respondents said the split would not have an impact on their business.

 

That being said, slightly more than 33% of survey respondents said Brexit would negatively impact their operations, and almost 5% fear very negative repercussions.

 

One of the imminent impacts is the depreciation of British Sterling. Mike Boswell, Managing Director of polymer distributor Plastribution, told PIE that as the British pound starts losing in value against other currencies, the country could be faced with higher raw materials prices, at least in the short term.

 

The depreciation is making it more expensive to import machinery and materials from several sources. The weakness of sterling does not really provide an incentive to export as the advantage to the exporter will offset by the higher price he has to pay for imported materials. How long our currency will remain at this level is unknown,” Philip Law added.
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