- Manufacturing in Mexico
- About Tetakawi
September 16, 2019
After multiple delays already, the United Kingdom is due to leave the European Union on October 31, but many experts say that the uncertainty generated by drawn-out negotiations have already made a lasting impact on the local economy and business growth. For that reason, no matter the final state of the Brexit deal, many multinational companies are considering relocating while UK-based companies are wondering if they might benefit from a more diversified global footprint.
Tetakawi is aiming to answer that question at an executive workshop on 22 November in London. The workshop will help UK manufacturers understand the costs of manufacturing in Mexico as well as how to better control costs for companies already operating in the country.
A strengthened UK-Mexico relationship
As the UK works to negotiate new free trade agreements with countries in the EU and throughout the world, to continue to serve as a strong platform for manufacturing and export, it’s finding a strong partner in Mexico. Both countries have expressed an ongoing commitment to strong trade with one another. In fact, the UK is focusing on its relationship with partners in the Americas, positioning Brexit as an opportunity to expand global relationships.
In August 2019, UK Foreign Secretary Dominic Raab launched a new partnership with Mexico aimed at boosting sustainable economic growth across both countries. The partnership agreement, reportedly the most wide-ranging agreement ever concluded between the two governments, promotes greater investment and trade in advanced manufacturing and technology, among other sectors. The new initiative is backed with GBP $60 million over the next four years from the UK Government’s Prosperity Fund. The funding is earmarked for opening markets that could create new opportunities for UK businesses.
This presents an opportunity for many British manufacturers, faced with the potential for sharply declining revenues after Brexit. Law firm Baker McKenzie predicts the impact of a “hard Brexit,” in which the UK leaves the EU customs union and bilateral tariffs revert to World Trade Organization’s “Most Favored Nation” levels for all UK-EU trade in goods, to be particularly painful for manufacturing companies. In its paper, The Realities of Trade After Brexit, the firm forecasts a GBP $7.9 billion drop in exports for automotive manufacturing companies alone due to the higher rates of tariffs and other barriers to export.
Manufacturers make their moves
Many manufacturing companies are reacting accordingly. Bloomberg is tracking British companies who are moving headquarters, cutting costs or putting deals on hold as a result of Brexit uncertainty. As Airbus Group CEO Thomas Enders told the paper, " We will review our U.K. investment strategy, like everybody else will."
Relocating, or expanding into new countries, is likely to play a role for many companies. And British companies have long known that Mexico's far-reaching free trade agreements give it tremendous access to markets throughout the world. Mexico has more free trade agreements than any other country in the world. It’s a strong partner to more than 50 countries, with agreements reaching into Europe, South America and Africa. Just last year, Mexico signed a new trade deal with the EU that virtually eliminates tariffs between the two blocs.
Given that the costs of exporting product are likely to rise as new tariffs impact UK companies after Brexit, low-cost manufacturing locations may become even more attractive. Operating in Mexico under the legal framework of a shelter service provider can help UK companies rapidly ramp up production in Mexico while taking advantage of the preferential tax and fiscal programs provided to foreign entities under IMMEX.
Get a better hold of costs
The key to long-term success in Mexico, as anywhere, is understanding and controlling costs. To learn more about the costs of setting up a manufacturing presence in Mexico, register today for Tetakawi’s executive workshop, 22 November from 8:00 am to 12:00 pm at the Swan at Shakespeare’s Globe in London. This workshop, hosted in partnership with The Institute of Export & International Trade, will offer information, insights, and data that can help inform stronger decision-making around expanding (or boosting the success of an existing operation) in Mexico.
With Mexico seeing new certainty in manufacturing with the nearing passage of the U.S.-Mexico-Canada agreement and its new agreement with the EU, it may offer just the stable partnership the UK needs in a post-Brexit world.
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