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Brexit: Effect On UK Film Supplies

Brexit: Effect on UK Film Supplies

Despite the UKs departure from the EU growing ever closer its potential effects on the UK’s flexible packaging industry remain unclear. Whilst this is a problem to many UK industries the UK flexibles sector is particularly vulnerable as currently over 90% of the UKs specialist films are imported from Europe. Against this background it may be a good time to consider again the potential consequence of Brexit on our industry.

Bulk Films

While there is a worldwide surplus of bulk films capacity particularly OPP supplies into the UK from outside the EU are currently subject to tariffs of between 5-10%. Thus film manufacturers from India, China, South East Asia and even Russia can produce bulk film competitively their supply into the UK is as best equal to European suppliers or just more expensive.

To some degree this is unfortunate as many of the plants we have seen in these countries have been newly built to supply growing home demand. Therefore in many cases they have “state of the art” manufacturing and production facilities allied to exemplary hygiene standards more than capable of meeting BRC accreditation requirements should their products be required in the UK.

Specialist Films

Here the picture is somewhat different, as many of the European film producers have invested heavily in both technology and manufacturing facilities in order to produce special film and coatings which differentiate them from the bulk commodity market. Thus not only have films been developed in polyester and nylon, but also OPP technology improvements producing high speed films, low temperature seal films, cavitated, white film etc… whilst coatings with PVDC, acrylic, alox, siox metallic etc… can be integrated in structures to accommodate an endless variety of specialist food packaging applications.

 Few if any manufacturers from outside the EU can compete with the technical expertise of the European film manufacturers as a consequence if there were any significant barriers to UK entry significant problems would arise for some specialist areas of food packaging.

Sterling

As ever the value of sterling against other currencies is the wild card. It would seem the 15% fall in the sterling/euro exchange rate since the Brexit’s vote has stabilised at around 1.12 1.14. However many pundits believe a “hard Brexit” could take the rate to parity. If that was the case then obviously UK film prices of all grades and types would escalate significantly.

That said without the EU tariffs commodity films from around the world would certainly reduce in price, depending on relative currency values. However should sterling retain its value against some currencies outside the EU this would open top door to those countries suppliers.

 Conclusion

Whilst it’s perhaps still too early to speculate on Brexit (I have no doubt we will visit this subject again) the UK remains Europe’s second largest market for flexible packaging and the largest single market for exports for EU film manufacturers. Whatever the politicians may think the EU companies will not want to lose their UK exports as these are critical to the financial health of many companies out there, particularly those who have focused on specials. That said the UK could have great difficulty finding alternatives to some of the more esoteric films so as in many other areas we are going to live together in peace after the split, let’s hope the politicians get out of the way and let us get on with it.

 

As ever we would welcome your thoughts on any of the items raised. I welcome you to join me on LinkedIn.

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