Just over three months have passed since the UK electorate chose narrowly (52% to 48%) in a referendum held on 23 June 2016 to instruct its government to end the country’s 43-year-long membership of the European Union (EU)—a process now commonly referred to as “Brexit”. The result of the vote took many by surprise, including supporters of the campaign to leave, and it is still too soon to be sure what the ramifications will be; in fact there is currently uncertainty as to when the UK government will invoke Article 50 of the Treaty of Lisbon, the first and necessary step in a period of preparation and negotiation lasting up to two years for the withdrawal of a member state, with some going as far as to speculate whether the government will even take this step; the results of the referendum are not legally binding and a 2+% swing in public opinion is modest by any standards, they argue.
It is clear, however, that the decision had and continues to have a dramatic impact on markets around the world. Within hours of the announcement of the result, for instance, the value of sterling fell by 10% to its weakest level against the US dollar for more than 30 years. Significant variations in exchange rates affect the price of goods and so the balance of trade. Simplistically, UK manufacturers can benefit from a weak currency, because their exports are effectively cheaper, while imports are hampered by the opposite effect. Analysts have even begun to talk of textile manufacturing returning to the UK, so-called “re-shoring”, if the fall in the exchange rate is maintained.
At the same time, stock markets around the globe, themselves still fragile and far from fully recovered following the financial crisis that began in 2007, are experiencing high levels of uncertainty, initially falling significantly in value, but currently being significantly higher than they were on 23 June 2016.
A constant throughout this narrative is continuing uncertainty. Uncertainty is bad, because it dampens the willingness to invest, which is particularly bad news in sectors of the economy, such as technical textiles, that require investments in new technologies. An unwillingness to invest also disproportionately affects small and medium enterprises (SMEs), which characterize a large part of the technical textiles industry. Worse still, the uncertainty will be prolonged; as recent history has shown, it takes many years to negotiate/renegotiate trade agreements and even those that are nearing completion, such as the Transatlantic Trade and Investment Partnership (TTIP) between the USA and the EU could be further delayed by the Brexit decision.
Against this gloomy background, it should be stated that the technical textiles sector has performed relatively well throughout the years since 2007, when it faced these same problems, as has been consistently documented in numerous reports, including the latest, World Markets for Technical Textiles to 2022, a comprehensive analysis of data compiled from many independent sources by CIRFS. We must all hope that by the time of the next edition of World Markets for Technical Textiles, the data can tell the same story.