Following nearly four years of Brexit uncertainty, the United Kingdom formally left the European Union on Jan. 31. Prime Minister Boris Johnson now has until the end of 2020 to negotiate a free-trade agreement with E.U. leaders.
Most analysts believe the 11-month period will be too short to hammer out a comprehensive FTA, in which case the country would go through a “hard Brexit,” meaning it would trade with the European Union without a formal deal, under World Trade Organization rules. It would lose access to the EU Single Market and Customs Union.
The marine industry has been left in a holding pattern regarding the actual conditions of Brexit, though Johnson’s December election victory confirmed there will be a dissolution between the European Union and the United Kingdom, in one form or another.
“It is important for our members to know that our relationship with the E.U., at least during the transitional period, will remain the same as it is now, and that it is business as usual,” says Lesley Robinson, CEO of the trade association British Marine.
Robinson shares the opinion that 11 months is too short for a viable free trade agreement, but says British Marine will keep members apprised of possible changes, warning them to prepare for a “hypothetical no-deal scenario.” British Marine advised boatbuilders to obtain Manufacturer Identity Codes to all E.U. export destinations.
“For our exporting members, the Eurozone and wider E.U. remain fundamental markets, accounting for half of all industry exports, and therefore a strong, frictionless trade agreement with them post-Brexit is crucial,” Robinson says, noting that U.K. exports have passed $1.31 billion for the first time since 2013.
Exports for the United Kingdom’s three largest boatbuilders — Princess, Sunseeker and Fairline — account for more than 50 percent of sales. For them, the last three years have been boom years, with Princess and Sunseeker having record sales last year.
According to media reports in mid-January, Princess was looking for a multimillion-dollar cash injection from its financiers to help meet increased demand. The company, which employs 3,000 in Plymouth, has seen its sales increase by 75 percent in the last three years. It launched nine new models in 2019 and unveiled five more at the Düsseldorf show this January. It has said that more than 90 percent of its production for 2020 is being built to order, with 40 percent of 2021 already covered with new orders.
Brexit has helped the builders by keeping the British pound weak against the Euro and U.S. dollar, though they complain about how the exchange rate has been erratic at times. Having a firm Brexit strategy in place should eliminate some of the topsy- turvy nature of the exchange rate, and if the pound remains weak, it will help fill the U.K. builders’ order books.
“According to our latest research, leisure marine exports have surpassed $1.31 billion for the first time since 2013, representing an impressive increase of 16 percent compared to the previous year,” Robinson says, attributing some of that to Brexit.
“One of our biggest concerns is importing parts and engines,” says a boatbuilding executive who asked not to be named. “There might also be duties on those components, which would have to be recovered when exporting the boat, causing a short-term cash flow issue.” The builder also worries about logistics with parts arriving from Europe being stuck in customs.
For the moment, however, there are more questions than answers about how Brexit will impact the British boating industry. The boatbuilder, however, says sales remain on track. “The first time we dealt with Brexit, there was a wait-and-see attitude among buyers,” he says. “This time, we’re not seeing any kind of drastic slowdown at all.”
This article originally appeared in the February 2020 issue.