Possible Effects of 'Brexit' on the UK Compressed Air Market

Now that Britain has decided to leave the European Union it is time to consider the possible effects on the UK compressed air industry.
What does it mean for compressor manufacturers? 
The majority of compressors sold in the UK are manufactured in mainland Europe – namely Italy and Germany. As a distributor for ABAC and Almig compressors we are in a better position than most to speculate on what the possible effects of ‘Brexit’ will be on compressor manufacturers.
In the short term (2 years) there will be very little difference – compressors will continue to be manufactured in Europe and shipped to the UK for sale without any tariffs. Once the UK does leave the European Union this could change – the key word being could – the truth is nobody knows for sure what trade terms the UK will be able to negotiate. The general consensus is that a levy of between 0-10% would be the most likely outcome. There is a very good chance that any increase in cost to the manufacturers would be passed on to the distributors and eventually the end consumer.
Another factor to consider for compressor manufacturers is the strength of the Euro vs GBP. As the pound falls it makes European manufactured machines more expensive to buy. In the unlikely event we saw an exceptionally large fall in the value of the pound (around 25%) along with a high trade tariff it could become uneconomical to continue importing compressors from the EU. The saving grace for the European compressor industry is that at present there are no “major” compressor manufacturers in the UK – there are a few companies who focus mainly on piston machines but there is nothing comparable to the large European manufacturers. There is some pressure from a growing Chinese compressor manufacturing market but given the cost of transporting machines and the lack of any real reputation it is likely that an increase in cost would ultimately have to be accepted.  
 
What does this mean for the distributors?
As discussed previously the end consumer is ultimately going to foot the bill for any increase in supplier costs, whether they are from trade tariffs, currency fluctuations or otherwise.  When coupled with the growing uncertainty that surrounds the British economy at present it is easy to speculate that a consumer would opt not to invest money into new compressed air equipment unless absolutely vital. This would ultimately mean a fall in sales for distributors and could also extend to other areas of the compressed air industry including servicing and installation.
On the other hand a possible introduction of trade tariffs could lead to increased sales leading up to ‘Brexit’ as companies are looking to make an investment in equipment before any likely price increase. Similar to the rush for buy-to-let investors to secure properties before the introduction of a higher stamp duty on second homes.
 
Will there be any effect on the end consumer? 
The end consumer could potentially see an increase in the cost of purchasing compressed air equipment. However until any trade agreements are reached and the currency fluctuations settle down it is impossible to say what this will be. In addition it has been suggested that consumers could see an increase in running costs as the cost of electricity rises over the next few years.
Our advice to any consumer considering investing in new compressed air equipment would be to consider a variable speed compressor – this would allow you to minimise the effects of any increase in energy costs as well as future-proofing your equipment.
What about regulations surrounding the use of compressed air? Currently the use of compressed air in the workplace is covered mainly by the Health and Safety Executive (HSE) – although EU directives are occasionally implemented into the HSE (there are 5 at present being transposed into UK law) it is governed nationally and therefore would not be likely to change significantly once Britain leaves the European Union.
 
So what action should we take? 
The truth is that at present it is too early to say – until the terms of any trade agreement are finalised it is unlikely the compressed air industry will notice much effect. As outlined earlier in this article one possible short term effect is a fall in sales due to the current period of uncertainty but this is speculative at best. In the long term there could be an increase in the price of imported machines but again this is speculative and even if it does happen the structure of the compressed air industry makes it virtually unavoidable.
If you want any advice on investing in new compressed air equipment or getting the most out of your current compressor you can call us on 01480 217904 or contact us via the website.