This month’s column is intended to shed light on a narrow issue—Brexit’s impact on the nonwoven fabrics industry –based on an unprecedented and historic development that occurred less than a month before the column went to print.  The intended goal is to set a benchmark for industry opinion—or a “snapshot” —taken as close as possible to Brexit Ground Zero. 

To that end, a survey was circulated through LinkedIn.com to nonwovens industry members all over the world just a few days after the Referendum vote.  The survey sought non-political opinion on Brexit’s expected impact to individual operations over the next 12 months. Industry leaders on both sides of the Atlantic were also contacted separately for their insights. 

Input came through emails, interviews, and conversations with more than a dozen industry leaders along with independent research. This column seeks to convey that input, sometimes collectively but most often directly from the source.     

Uncertainty
A near-universal theme is that “uncertainty” is bad for global industries of all sorts and Brexit promises a whole lot of uncertainty for a really long time. Uncertainty alters/delays investment, stalls decision making and unnerves board rooms. For the NAFTA market at least, this phenomenon was recently demonstrated in the aftermath of 9/11 and the collapse of Lehman Bros but can also be seen in market-driven economies around the world.

What makes Brexit stand out is that its associated uncertainty is tsunami-esque in proportion. With Brexit, that is, the only current certainty is that implementation will produce a hydra-headed beast of decisions that must be made—many of which carry multiple possible consequences with an unimaginable number of unintended potential outcomes—at the highest levels of the U.K. and EU governments. On deadlines. Brexit, in other words, all but codifies uncertainty for all global industries – including nonwovens – for at least the next six to 10 years.

Some inputs were less concerned with uncertainty issues than others. Several comments underlined the fact that the nonwovens industry is less impacted by uncertainty than other industries because its product portfolio includes many items deemed essential to everyday life: diapers, wipes, hygiene products, filters of all sorts, wound care…it’s a long list. 

Perhaps to be expected, input expressing some of the greatest concern about uncertainty came from the EU. As EDANA’s general manager Pierre Wiertz writes: “Like many, EDANA (International
Association serving the Nonwovens and Related Industries) was surprised at the results of the U.K.’s June’s referendum on membership to the European Union, but recognizes the results, and [intent] of the voters. While the current status of the U.K.’s departure, and any agreement on the transfer of regulations or trade agreements are unclear, we are committed to assessing the potential impact for our industry and helping our member companies navigate the regulatory environment for nonwovens and related products through this transition.

“In those areas we will continue to monitor and anticipate changes within the mission of our staff and EDANA’s working groups, supported by expertise from our global member companies, and in close liaison with partner organizations in the U.K.”

To Wiertz’s point, it’s going to take years to sort out trade issues and transfer of regulation processes alone. But those negotiations are mostly limited to the EU and those portions of the U.K. that adhere to Brexit’s referendum results so EDANA’s concerns are completely understandable. 

INDA president Dave Rousse also cited uncertainty over Brexit outcomes as a potential drag on the North American nonwovens industry, but he was more optimistic—even a bit bullish.
Internationally, Rousse notes that the nonwovens industry is “dynamic” and “flexible,” and predicts any negative impacts due to Brexit will be “headwinds” at most.  

As for impacts on the North American nonwovens industry specifically, Dave pointed out that the U.S. is globally known for its low energy costs, reliable infrastructure, educated workforce, reasonable wages, and stability. This knowledge, Dave asserts, has already attracted “substantial investment” from EU nations over the past few years and should drive more growth for years to come. 
All in all, Rousse looks for the North American nonwovens market to “thrive” no matter what outcomes Brexit eventually brings. 

Trade, Mobility, Money
Other input from the EU and the U.K. (England and Ireland) was almost universally dire, especially with regard to currency issues. Considering the fact that the British Pound lost about 10% of its value overnight on June 29 and has pretty much stayed at the devalued rate since, this is understandable. While weaker currencies tend to increase a nation’s exports over time, they can also spark inflation and generally reduce national buying power.

U.K./EU input also notes uncertainty related to border issues including tourism, travel, and work privileges. As one industry member laments, “If I can’t get work on the continent because I’m a British citizen I’m just screwed.” Another pointed to Brexit’s potential impact on the Good Friday Agreement that has unified North and South Ireland since 1998.

As Gerry Adams, a member of Ireland’s Parliament, explains: “By its reckless action, the British government has set aside the democratic consent that was central to the Good Friday Agreement and set a course that would fundamentally alter the relationships between the North and South of Ireland, and between Ireland and Britain.”

Echoing input received for this column, Adams goes on to note: “The first and most obvious impact will be on the North-South border. In the past, this was marked by checkpoints, military bases and customs posts. Today, thanks to the peace agreement, the long stoppages and searches are gone, and the border is almost impossible to discern.

“As a consequence of Brexit, that near-vanished border will become an international frontier between the European Union and an external state. Ireland’s economy and people will face the renewed imposition of checkpoints, as well as blocks to trade, services and the free movement of workers. Communities united by the Good Friday Agreement will be divided once again.”

This scenario doesn’t sound particularly conducive for doing business but only exists on the presumption that Ireland will break away from the U.K. and join the EU instead,  which is certainly possible but considered unlikely at present (ditto for Scotland).