Industry Sectors and Brexit Risks

 
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Where available, SIC Code and Operations is shown in our Comprehensive Report and our Credit Analysts Report. The following sectors may represent a Brexit flag indicator.

 

Automotive industry

Over three quarters of all the cars produced in the UK are exported abroad, over half of which are exported to the EU. Less than half the components used are sourced from the UK and automotive manufacturers could face paying import tariffs on supplies from the EU.

Airline sector

Airlines will have to change their routes and operations to adapt to EU laws and regulations as they would apply after Brexit.

Agriculture

Brexit concerns for this sector include changes relating to farm subsidies. Agriculture and farming employ seasonal workers from the European Union and may contend with labour shortages or additional cost to maintain processes. Some farming businesses have already indicated they are having problems related to Brexit in terms of the outlook for future trade and sourcing labour. Around 20% of workers in UK farming prior to Brexit were from the EU.

Financial Services

Banks and financial services companies face post-Brexit concerns with exclusion from the EU passporting system. This system for banks and financial services companies enables firms that are authorised in any EU or EEA state to trade more easily in any other with minimal additional authorisation.

Food

Food is dependent upon agriculture, and both are influenced by the handling of the Northern Ireland border, EU food standards and employment regulations. Prior to Brexit approximately 30% of food in UK supermarkets was imported from EU countries. In the absence of agreements with the EU the farming industry within the UK would have to increase supply at the same time as facing possible labour shortages and increased costs.

Health Care

Before Brexit around 10% of doctors in UK hospitals were from the EU. The health care sector, both the NHS and private providers, may have to address skills and labour shortages, and this could result in higher costs to attract the personnel with the required skills and qualifications.

Hospitality

The hospitality sector, including hotels, travel and tourism, has previously relied on labour from the EU. Much of the workforce was either seasonal, or in some cases well qualified and multi-lingual management level employees. In addition to labour issues, the sector has concerns for any downturn in tourism to the UK after Brexit.

Manufacturing

The issues for this sector are wide and vary from company to company. Some will be concerned if they manufacture goods for export in the EU, as will companies that rely on EU suppliers. As well as impacting sales, the sector has to contend with possible disruption to the supply chain, stock control, and in some cases the prospect of sourcing non-EU suppliers for critical components. A weak pound will also drive up the import costs for goods and services sourced from outside the UK.

Pharmaceuticals

Many UK pharmaceutical companies carry out research and development in the EU. In addition, the EMA (European Medicines Agency) is the centralised organisation which authorises medicines throughout the EU and the sector may have to contend with changes resulting from Brexit in respect of regulatory rules for authorising drugs.

Retail

The retail sector and in particular the large chain and high end retailers may see some benefit if the pound is weaker, as sales could be boosted from tourist shopping. However some of this benefit could be offset if they import a large proportion of their stock and the weak pound causes their costs to rise. The retail sector will also come under pressure if domestic consumers cut back on spending.

Small Businesses

The potential impact of Brexit on the SME businesses is less clearly identified. Those companies that have EU trading partners, suppliers and customers, will need to handle a post-Brexit legislative environment. More generally there are concerns for any economic downturn in the UK that could cause smaller businesses to struggle.

Telecoms

Brexit for the UK means the telecoms industry potentially leaving the EU Digital Single Market. The telecoms network providers will have to review cross-border tariffs and telecommunications logistics.

 

See also: Brexit and Company Credit Risk.


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