United Kingdom / Analyst Insights
Counting down to Brexit

What information do you want to see from IBISWorld on COVID-19? We'd love to hear from you

by Alexander Green, Content Editor
Jan 29 2019

As the UK's departure from the European Union draws ever closer, uncertainty continues to plague the form of the final outcome.

In this special 23-page report, IBISWorld provides a comprehensive overview of the Brexit concerns and outcomes facing the Agricultural, Manufacturing and Finance sectors, guiding you through the promises and pitfalls that stand to affect businesses up and down the country. 

To download the full report, please click here. 


Below, we provide an Executive Summary of this report, detailing the effects of a no-deal exit from the European Union.

The Agricultural Sector

Key points

Labour concerns

The weak pound has already led to labour shortages, and agricultural operators have expressed concerns over any disruptions to the ability of UK farms to utilise migrant labour.

Subsidy schemes

Subsidies became immediately larger upon the depreciation of the pound, but whilst existing levels of funding have been guaranteed through 2022, future funding systems have the capacity to cause significant disruption.


Farming associations such as the National Farmers’ Union have expressed the importance of securing a free-trade deal with the European Union and ensuring that domestic farmers are not overly exposed to international competition following the UK’s exit.



The UK Agricultural sector in a no-deal scenario: summary

A no-deal Brexit has been roundly excoriated by many agricultural spokespeople, with ‘avoiding a no-deal outcome and any short-term political and economic turmoil’ the first of the NFU Council’s six principles on delivering the best outcome from Brexit for British farmers. As many agricultural products are perishable, approximately two-thirds of exports across the sector are destined for the European Union, with the figure rising to 80% for vegetable exports. The tariff and non-tariff barriers brought about by no-deal Brexit would therefore be highly disruptive.

In addition to raising the cost of British exports, significantly reducing their competitiveness, barriers to trade would also affect the availability of farm inputs, such as medicines, and would end the mutual recognition of certifications, affecting the integrity of organic producers. The NFU has also raised concerns that UK producers could be exposed to global competition from cheaper producers operating under different production standards, which would significantly undermine the sector. Barriers to free movement, meanwhile, would cause difficulties over harvest time, and it is uncertain whether proposed immigration changes would allow the flexibility required to prevent disruption. The government has guaranteed funding at the level of the EU’s Common Agricultural Policy (CAP) through 2022, a domestic guarantee that would hold firm even under a no-deal scenario. Ultimately, the consensus in the agricultural sector is that any Brexit deal will require a transitional deal in order to avoid causing significant disruption and difficulties for UK producers.


The Manufacturing Sector

Key points


For many manufacturers, the European Union is the single largest market, and the imposition of any barriers to trade would reverse the currently enjoyed benefits of the weaker pound and significantly reduce competitiveness.

Supply chains

Large manufacturing industries have highly international supply chains, with many using just-in-time inventory practices. Non-tariff barriers could render such systems unviable, having a significant knock-on effect throughout the supply chain.


Many manufacturers have called for regulatory harmony, stating that seeking to operate under two separate systems domestically and for exports would increase costs and reduce competitiveness.

Divergence, investment and influence

The relocation of the EMA is the most visible example, but many operators across the manufacturing sector have expressed concerns that withdrawing from the European Union decreases the UK’s ability to shape global regulations in its favour, and also makes the country a less attractive location for international investment.



The UK Manufacturing sector in a no-deal scenario: summary

Manufacturing industries heavily engaged in imports and exports will naturally be the most affected, as tariff and non-tariff barriers would affect international competitiveness. Whilst the United Kingdom has remained a member of the European Union, many manufacturers have benefited from the depreciation of the pound, as this has improved the competitiveness of UK products on global markets. Further weakness in the pound stemming from a no-deal Brexit would not have a similar desired effect, however, as the range of tariff and non-tariff barriers would heavily undermine any advantages that could be obtained through a weaker pound. Most manufacturing associations, such as the SMMT, have stated that it is vital the government ‘secures tariff-free access to European and other global markets’

Large manufacturers have repeatedly highlighted the threat that non-tariff barriers pose to their supply chains, with the automotive sector stressing that just-in-time production would ‘grind to a halt’. Although this is a more pressing concern for large and globalised industries, like the automotive and aerospace industries, the effects of delays trickle through their extensive supply chains, and all industries with imported inputs would face additional costs and increased delays to some extent.

Finally, regulatory divergence would pose considerable problems regarding ratification and the legality of cross border trade. This is most apparent in the highly regulated chemicals and pharmaceuticals sectors, with the Department for Business, Energy and Industrial Strategy stating that ‘of all the barriers to trade that we have considered, it is regulatory divergence that causes the most concern for all those from whom we have received evidence.’ Overall, as 60% of industries in the manufacturing sector have a high level of exports, such concerns are highly pertinent.


The Financial Services Sector

Key points


The potential loss of passporting rights under a no-deal scenario would have a significant impact on the globalised financial services sector. Although preparations have been taken, uncertainty has continued to weigh on performance.


Whilst third-country ‘equivalence’ is baked into regimes such as MiFID II, this is not comprehensive, and some operators will have to open branches or subsidiaries in the European Union. Market access based on equivalence was not expanded upon in the Draft Withdrawal Agreement.


The Financial Conduct Authority has consistently backed regulatory alignment with the European Union following Brexit.

Economic conditions

A downturn in economic conditions, and an expected fall in the value of the pound following a no-deal Brexit would undercut the demand base for the sector as a whole. However, this could boost the value of the FTSE 100 as the average constituent generates around 70% of its revenue from earnings in a foreign currency. This is likely to increase the value of assets under management of funds that have a high exposure to these shares.

Free movement of labour

Many employees in the sector are EU nationals, and concerns have been raised about staffing barriers.



The UK Financial Services sector in a no-deal scenario: summary

The UK financial services sector is highly globalised, and its efficient operations are based upon the free trade of services across the European Union. The loss of passporting rights, under which financial institutions may establish branches across the European Union and trade freely across European borders, is the most prominent concern raised by the sector. More than 40% of UK financial services exports are conducted with the European Union, whilst the Fund Management industry (IBISWorld report K66.300) sourced approximately 40% of its assets under management from overseas clients in 2017. A no-deal Brexit, without provisions for cross-border trading or ratified equivalence, would bring a stop to a large number of operations; insurance industries and the Pension Funding industry (IBISWorld report K65.300), for example, would be placed in ‘legal limbo’, unable to pay out to clients living in EU countries. As a result of this potential check on business activity, 35% of companies monitored in EY’s Financial Services most recent Brexit Tracker confirmed intentions to move some of their operations or staff from the United Kingdom to Europe.

Most industry associations have expressed their desire to retain existing regulatory frameworks, such as Solvency II, as without remaining compliant, UK companies would be unable to access the European single market. The Financial Conduct Authority has consistently backed equivalence and regulatory alignment with the European Union following Brexit, as without these financial markets and consumer protection standards would be closed off. Nevertheless, many have criticised a system of third-country equivalence as lacking in comprehension compared to the UK financial sectors’ current operating conditions.

The economic fallout of a no-deal Brexit would hamper demand from a number of key sectors but, as after the depreciation of the pound following the EU referendum result, could boost the value of the FTSE 100, as the average constituent generates around 70% of its revenue from earnings in a foreign currency. Finally, approximately one in five employees in the City of London are EU nationals, according to the ONS, and potential restrictions on free movement would therefore be particularly piercing for the financial services sector.


For a printable pdf of this Executive Summary, please click here.

For a printable pdf of the full report, please click here.