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EU: should we stay or should we go? A VSD repairer's view

17 June, 2016

If the UK votes to leave the EU in the upcoming referendum, it could have far-reaching effects for SMEs operating in the VSD (variable-speed drive) repair and refurbishment industry. Jordan Griffin, technical director at Northern Drives & Controls, gives his personal view on the challenges that NDC and others could face.

Like most SMEs in the UK automation service or repair industries, NDC are no strangers to the legislative and regulatory requirements of trading within – and, indeed, outside – the EU. We’ve built up our international business by establishing a network of global distributors. Unsurprisingly, we found it much easier to grow our business in Europe than in other parts of the world, due mainly to the many similarities in technical, financial and legal standards that the UK shares with EU member states.

This legislation is often criticised as being bureaucratic red tape that imposes additional costs which smaller businesses, in particular, feel. Leave campaigners are looking to negotiate a free trade agreement with the EU, which could help to remove some of that red tape, a move which would be welcomed by many SMEs. However, all companies that enjoy the free trade area must comply with the same standards and costs so, in actual fact, there is a level playing field.

EU legislation has greatly helped in harmonising standards across the EU and has allowed companies such as NDC to sell their products and services to EU countries knowing that they will meet all current regulations. In fact, we have experienced considerably more red tape when exporting to countries outside of the EU.

STRENGTH OF RELATIONSHIPS

Uncertainty will be the most likely immediate effect if Britain votes to leave the EU. And that uncertainty is sure to have an impact on UK growth and investment which will, in turn, affect UK industry. While we may have the opportunity to trade more freely with other economic areas – which should be an advantage to UK exporters – it’s hard to imagine that this would compensate the UK for any significant loss of EU trade in the short-to-medium term. 

Today, NDC's exports outside of the EU account for less than 10% of our business. In the future, like many other UK exporters, we would hope to increase trade outside of the EU, but this continues to depend on reaching free trade agreements with other large trading blocs. Less-developed economies offer the prospect of potentially huge growth for export, and improved relationships with these countries could be hugely beneficial to the UK. Outside of the EU, we would be amongst a handful of Western economies that could gain full access to these markets.

Longer term, it’s hard to say what the effects of a UK exit could be on the VSD repair industry. Throughout the development of the automation industry, Britain has been a member of the European Union and the country is full of European-manufactured automation products. UK exporters have also worked hard to develop strong relationships within the EU. If we were to shift focus from the EU and replace these relationships with perhaps the Chinese or Brazilians, it will obviously take a lot of time and resources to get us back to the position we’re in today within Europe.

SKILLS SHORTAGES

Like other UK engineering businesses, NDC is affected by the skills shortage. The company finds it easier to recruit skilled personnel from within the EU, than outside.

Concerns around the skills gap in the electronics engineering sector are ongoing – an issue which sits somewhat outside of the EU referendum outcome. There is a significant lack of practical electronics skills in the UK and it is undoubtedly an area where higher education institutions should focus. However, this is a trend that we are also seeing in other Western European education systems. The electronics service industry needs not only academic skills, but also practical skills to perform repairs and upgrades to the growing number of automated systems that we find in everyday life and work.

Like many UK businesses, NDC is supporting the growth of engineering skills by introducing our own graduate apprenticeship scheme. This enables us to take on degree-qualified engineers and then develop their practical skills to ensure that they can meet the levels of ability and quality that the industry needs.

Our workforce has been the key to exploiting our export potential. We have 14 nationalities working for the company in management, technical, customer support, sales and marketing roles. They have brought with them not only language skills and cultural knowledge, but also technical skills that are in short supply within the UK.

As is the nature of diversity, our approach is to employ the very best people we can find, independent of nationality. If those people are EU residents, then it is easy. However, if those candidates are from outside of the EU, it represents more of a problem. Employing someone from outside of the EU means that the candidate must meet strict criteria and must be sponsored by a Home Office registered employer. Criteria such as this could become more commonplace when employing EU citizens if we are no longer a member state.

On the flipside, perhaps the reduced availability of these skills, by ending free movement, will push the UK education system and industry training programmes to develop courses that truly start to address the UK skills shortage.

For the time being, we continue to be in a period of ifs, buts and maybes surrounding the upcoming EU referendum.  Like most SMEs, even with all the information out there, at NDC we can only speculate how the result of the referendum will truly affect our business.

Northern Drives & Controls recently won a Queen's Award for Enterprise for International Trade.

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