Could the Brexit Ripple Effect Hit U.S. Glass Companies?

Last Thursday, more than 17 million Britons voted for the United Kingdom to leave the European Union. The immediate repercussions of the impending British exit, or Brexit, on financial markets were sudden and severe. Beyond the markets, some economists are warning of a recession in the UK that could extend into Europe and beyond, and are readjusting GDP forecasts for both Europe and the United States (the U.S. GDP forecast for the second half of 2016 is down to 2 percent, from 2.25 percent).

The longer term economic effects of Brexit are uncertain. Some economists speculate that the markets will begin to stabilize, while others forecast a more medium- and long-term slowdown. Other economists are even optimistic. 

Also unclear is the impact that Brexit and its related economic repercussions will have on U.S. construction and manufacturing—and thus on the North American glass industry. (Learn more about how UK construction might be affected here and here, and how UK manufacturing might be affected here). Will the U.S. construction economy face a slowdown? For manufacturers and suppliers, will exports suffer? Will a higher dollar negatively affect sales?

Since the referendum last week, economists and officials from several real estate and manufacturing organizations have weighed in to offer some insight on how Brexit, and its related market uncertainty, might impact U.S. companies. One interesting report came from the National Association of Manufacturers, which posted a video interview and related article on the impact of the vote on domestic manufacturers.  

“Europe is an important market for U.S. manufacturers. Roughly one fifth of all exports we sell abroad go to Europe. And the United Kingdom is actually our fifth largest trading partner. The bottom line is there is certainly a lot of uncertainty over the next few weeks, few months,” says Chad Moutray, chief economist for NAM. Additionally, “this is going to add a level of uncertainty in general to the overall economy. We have already struggled a bit this year with exports and other global headwinds. This adds to that.”

In addition to the economic uncertainty, the Brexit raises questions about potential trade and policy implications, according to Linda Dempsey, the vice president of international economic affairs for NAM.  “We expect that yesterday’s vote is going to be a real drag on the ongoing negotiations that the U.S. and Europeans started three years ago—the Transatlantic Trade and Investment Partnership,” Dempsey says. “It’s going to have a really big impact on the trade negotiations to the detriment of manufacturers in the United States who want to break down barriers.”

However, Moutray said the more dire predictions about the fallout from Brexit are probably overblown, at least for U.S. manufacturers. “The bottom line is that this is going to be something that continues to add a level of uncertainty,” he said. “Expect exports to fall a little bit certainly in the intervening months. But in the long term, I wouldn’t expect any major ramifications from it so long as those trade agreements continue to allow access to flow between Britain and the European Union.”    

Several officials from the NAIOP Commercial Real Estate Development Association also offered more cautious optimism about the extent of the Brexit impact on U.S. real estate. “The direct impact of Brexit will mostly be felt by Britain and the EU and will probably have a minimal direct impact on the U.S. economy and U.S. commercial real estate,” says Gerard Mildner, director, Center for Real Estate, Portland State University. “The risk is that other countries will copy Britain and impose trade barriers. The most exposed U.S. sectors will be export businesses (e.g., aerospace, agriculture, technology), port-related industrial property and the financial industry.”

What impact do you think Brexit could have on the glass industry and on your company? Have you adjusted your internal forecasts because of the Brexit vote? Feel free to comment below, or email me directly. 

Katy Devlin is editor of Glass Magazine. Contact her at kdevlin@glass.org. 

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