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Brexit and the marine sector: fine waters ahead?

Kevin Walmsley

15 September 2016

It is no secret that some stormy seas have created headlines for companies in the marine industry. Princess Yachts had a difficult start to 2016 as they faced 172 job losses from their Plymouth headquarters and Sunseeker too reported losses of £41m. Just like many other industry sectors in the UK, the marine industry will no doubt be wondering how Brexit might affect them in years to come.

Luxury boat manufacturer, Fairline, entered in to administration at the end of 2015 – just two months after acquisition from Wessex Bristol and they aren’t alone. Sealine International, a long established builder of yachts and motorboats, was acquired by HanseGroup during the autumn of 2013, following a period of collapse.  This leaves a small number of quality UK boat builders for who Brexit may be more of an opportunity and less of a challenge.

Many may think rocky shores are on the horizon for those in the industry, however, there could be some good news to come. The fall of Sterling is one concrete outcome that could have immediate repercussions for those trading overseas. Whilst importing costs for components will rise, the reduced value of sterling for British boat builders incurring labour costs in the UK will make those boats more attractive to overseas buyers. The UK marine sector has an established and strong position for many years supplying to the EU- and beyond and the lower value of the pound should make them more competitive in the short term.

The fall in currency value does however leave more for the Government to do to support the marine sector in the wider sense, for example, enhancing the tonnage tax regime to include a UK-only link. This could attract more ship management business to the UK and increase tonnage on the UK register.

A stronger foundation for business could also see more investors come to market as financial services to the shipping sector has been in steady decline during previous years and the number of financial institutions willing to lend money to shipping are becoming few and far between.

Yacht construction is a sector that could particularly benefit from such investment – especially as the UK maintains critical mass – coupled with a weaker Sterling value yacht builders could still benefit hugely from targeted state support. The marine sector has rightly been hailed for its uptake and provision of apprenticeships a bright light for the future both for those being trained and for the future of the industry.  The British marine sector has a fine tradition and there is every reason for being more than optimistic about its future under the right encouragement and management.

Another positive outcome could be on the lightening of regulatory burden associated with EU membership. Some of the existing regulation in relation to port services for example, emissions and recycling are seen as problematic impositions on smaller maritime businesses.

But the longer-term picture is still up for grabs. Continued free access to the EU’s single market would be an ideal outcome for many, but our EU partners have made clear that this would require us to maintain free movement of workers, which is precisely what the British people appear to have said they don’t want. A period of negotiation is a certainty, but whilst those may be stormy waters, the marine sector has the opportunity to sail on calm seas in the next few years and to take the challenges the economy is facing overall as an opportunity.

Will that have a knock-on impact on other support services? And, what of UK crews operating in EU waters? The devil is always in the detail but planning ahead in the fog of such uncertainty is always going to be a challenge.

At Wilkins Kennedy we have a depth of knowledge and experience in the maritime sector that will be able to help you and your firm chart a course between the rocks that may lie ahead.

About Kevin Walmsley

Kevin Walmsley

Kevin works closely with his clients who include individuals, owner managed businesses, larger corporates, partnerships , legal and professional practices and international businesses. The Managing Partner of the Heathrow Office, Kevin serves on the firm’s Management Committee and is a member of the Corporate Finance Faculty, the Audit Faculty and the Solicitors Special Interest Group of the Institute of Chartered Accountants in England and Wales, the Expert Witness Institute and the Institute of Directors.

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