Could Brexit capsize the British marine industry?

Business is booming at the Southampton Boat Show, the annual showcase for the British boat and yacht industry.

The event has attracted more than 500 companies, with 100 new products being launched. These include two luxury motor boats by Sunseeker International, Britain’s biggest boat builder, whose vessels have appeared in no fewer than four James Bond movies.

Even though demand for state-of-the-art luxury yachts is at record levels on the back of a weak British pound, a dark cloud is looming on the horizon: Brexit.

“Brexit for us is an unknown, we don’t really know what is going to happen,” Sunseeker sales director Sean Robertson told CNN in Southampton, on the English south coast.

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Talking point

Brexit was one of the main talking points during the 50th anniversary of the boat show, which is organized by lobby group British Marine.

Although it has been more than two years since the UK voted in favor of leaving the EU, no one knows exactly what will happen as the country prepares to leave on March 29, 2019.

Will it be a “soft Brexit” – meaning Britain stays closely aligned with the EU? – or will it be a “no-deal” Brexit, in which case Britain’s exit from the EU would be immediate, abruptly ending a decades-long freedom of movement of goods, services and people within the world’s biggest trading bloc.

“You always have a level of risk, economic or within the business, or both, but this level of uncertainty is unprecedented,” Lesley Robinson, chief executive of British Marine, told CNN. “I couldn’t back a horse at the moment.”

British Marine’s 1500 members, who range from the world’s leading superyacht builders to brokers, marinas, passenger boats and engine-makers, play a pivotal part in the largely services-driven UK economy, employing more than 33,000 people. Europe accounts for more than 40% of UK marine exports, compared with 18% for North America.

Although British Marine prefers a soft Brexit scenario because it will have the least disruption for its members, it is seeking clarification from the British government on a few key issues.

“For example, the future of value-added-tax on craft already placed in the market, because that point is not resolved and that’s a 20% extra cost,” Robinson said. “And like many other industries, there is the whole point around immigration and continued access to skilled labor.”

A bad deal with Brussels could have a big impact on a sector that is already struggling with a skills gap.

“If there was no suitable immigration agreement, that really could impact the after-sales market of service and repair, and harm our access to skilled labor,” Robinson said. “That would be a problem.”

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EU workforce

Take Sunseeker, whose 2,500-man strong workforce in Poole, Dorset, on England’s south coast, employs between 300 and 400 EU citizens.

“It’s always worked very well for us,” Sunseeker’s Robertson said about the EU’s internal market, which allows citizens of all 28 member states to work in each other’s countries. “They work very hard, and we don’t want to lose that.”

So far, Brexit has been a “mixed bag,” for the marine industry, Robinson said.

On the one hand, UK exports “have clearly been boosted by the drop in the pound after the Brexit referendum, and they are up about 4.7%,” said Robinson, who used to head up MDL Marinas before joining British Marine as its first female boss in July.

“The big boat manufacturers…their margins are being squeezed by higher costs for sure. On the other hand, their sales books are full. So margins potentially down, but volume up,” she said.

But things are less positive for those in the supply chain or import business.

In 2014, the UK imported more than ￡100 million in boats. In 2017, a year after the outcome of the Brexit referendum prompted a sharp drop in the pound against other major currencies, boat imports had dwindled to just ￡30 million.

Second-hand boat businesses in Britain are also struggling.

“It’s very difficult to get second-hand boats because with the drop in the pound, it’s been easy for people to sell them in Europe,” Robinson said.

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Demand soars

Despite uncertainty about the future, Sunseeker is reporting record demand for its high-end luxury motor boats, with its order book for 2018 completely sold out, while half of its 2019 line-up has already been snapped up by wealthy buyers.

With 45% of Sunseeker’s sales coming from Europe, and 35% from America and the rest from the Middle East, Far East and South America, much is at stake in the Brexit talks.

“We’ve tried to plan, we’ve tried to look at all scenarios, at how we would export, what complications there would be on bringing the componentry in and what effect that would have on us financially,” said Sunseeker’s Robertson, as he sat on the top deck of the new ￡2.2 million ($2.9 million) Predator 74 on a sunny day at the Southampton Boat Show.

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“So we’ve planned for all eventualities. But I have to be honest, at the moment, we don’t know. But the good thing is the clients seem to buying anyway. As long as we can continue to do that going forward, then great. And hopefully, we can then work through Brexit.”