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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: The Make UK lobby representing manufacturers across bitten says that

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Speaker 2: the tariffs imposed by President Donald Trump are devastating for

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Speaker 2: UK manufacturing, but according to Bloomberg reporting, British officials say

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Speaker 2: that the UK is getting mixed signals on whether this

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Speaker 2: ten percent have is permanent or not, and the UK

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Speaker 2: government continues to pursue a UK US bilateral trade deal.

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Speaker 2: Joining us this morning is Stephen Phipson, who is CEO

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Speaker 2: of Make UK, the lobby that represents UK manufacturing businesses. Stephen,

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Speaker 2: welcome back to Bloomberg Radio. Thanks for your time. Look,

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Speaker 2: I'll cut to the chase. We know that it's bad

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Speaker 2: ten percent tariffs anyway you slice it. How tough should

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Speaker 2: the British government be with the UK? The indication is

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Speaker 2: not very well.

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Speaker 3: Actually, Callen.

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Speaker 4: What we should be doing is negotiating a deal. So

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Speaker 4: we're fully behind what's happened so far in terms of

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Speaker 4: Keir Starmer trying to really you know, develop that relationship

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Speaker 4: with the US government, which is which has been very

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Speaker 4: very impressive so far, and the tirelest efforts of the

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Speaker 4: Business Secretary to try and negotiate and our push is

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Speaker 4: to try to get a negotiated deal. We don't think

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Speaker 4: it's in anyone's interest to try to escalate. And I

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Speaker 4: think in terms of the effect on manufacturing, ten percent,

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Speaker 4: you know, sounds reasonable, but don't forget we've got twenty

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Speaker 4: five percent on our automobile sector, which is really really challenging.

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Speaker 4: We've got quite a large automotive activity in the UK,

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Speaker 4: we've got the steel tariffs, and of course the other

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Speaker 4: problem is that a lot of our exports in the

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Speaker 4: supply chain go to the EU. So with the EU

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Speaker 4: at twenty percent, if those volumes drop off, that has

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Speaker 4: a direct impact on UK manufacturing volumes. So we think

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Speaker 4: the way through this is to really concentrate on trying

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Speaker 4: to see if we can negotiate.

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Speaker 3: A deal with the US.

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Speaker 1: Okay, step, when you're talking about negotiating, you're obviously not

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Speaker 1: thinking that escalating is the best way out of this.

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Speaker 1: But what does Britain have to concede to bring down

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Speaker 1: these tariffs?

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Speaker 4: Well, that's a very interesting point, I think. I mean,

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Speaker 4: so far these tarots have been concentrating, of course on products.

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Speaker 4: There may be something on the services side, particularly because

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Speaker 4: that's the large import. If you like into the UK

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Speaker 4: from the US, so we might see where the government

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Speaker 4: goes with that. At the moment, they're not sharing the

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Speaker 4: details of what the negotiations look like, but.

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Speaker 3: They are assuring us that they are making progress.

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Speaker 1: So are your members saying anything to you about what

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Speaker 1: possibly could should be conceded.

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Speaker 4: Well, not directly in terms of manufacturing. What they're really

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Speaker 4: focused on the moment. At the moment is trying to

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Speaker 4: work through the detail and trying to understand what this

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Speaker 4: effect is going to be. I think it's pretty clear

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Speaker 4: with automotive and there's a lot of concern about what

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Speaker 4: that's going to do to volumes. But of course many

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Speaker 4: of the other things we're exporting our high technology, advanced

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Speaker 4: manufacturing products to the United States, many of those companies

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Speaker 4: have never done really got involved in tariffs before, so

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Speaker 4: there's a lot of concern about what that's going to

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Speaker 4: do to volumes. So really there's a lot of uncertainty

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Speaker 4: at the moment. There's also some some big questions going on,

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Speaker 4: I think, which is also worth thinking about, particularly Northern Ireland.

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Speaker 3: I mean, that's a complex situation.

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Speaker 4: We've got a number of really important manufacturing sites in

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Speaker 4: an eye they've now got the situation between two borders

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Speaker 4: twenty percent on one side, ten percent on the other.

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Speaker 3: The winds of framework.

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Speaker 4: Everyone's unclear as to how that's going to work in

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Speaker 4: this scenario. So there's quite a lot of detail to

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Speaker 4: run through at this stage the game. We're talking about

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Speaker 4: the initial reactions here.

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Speaker 2: Yeah, absolutely, Northern Island immensely complicated, isn't it. For really,

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Speaker 2: it's because Northern Ireland has effectively stayed within Europe for

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Speaker 2: kind of practical purposes because of the border issue. In

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Speaker 2: terms of the overall view though, I mean, is Britain

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Speaker 2: basically breathing a sigh of relief. Eighty percent of our

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Speaker 2: economy and services led, so you know, if we have

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Speaker 2: to sacrifice a bit of manufacturing. The government seems to

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Speaker 2: be saying, you know, we're fine with that. You know,

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Speaker 2: let's just, you know, let's hope that the US doesn't

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Speaker 2: think about the kind of services side of the business.

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Speaker 2: Is that is that the idea? Do you think that

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Speaker 2: the UK will go into a recession? It won't surely

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Speaker 2: as a result of this.

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Speaker 4: Well, well again we have to see the effect on volumes.

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Speaker 4: One thing I would point out, I mean, the government

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Speaker 4: is taking the manufacturing issue very seriously.

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Speaker 3: It's forty five percent of our exports.

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Speaker 4: So a really important part of the export activity of

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Speaker 4: the UK in terms of a trading nation are manufactured products,

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Speaker 4: most of them advanced manufacturing products one form or another,

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Speaker 4: from commercial aerospace to defense, to luxury vehicles, that sort

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Speaker 4: of stuff, and so that is and of course it

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Speaker 4: creates high quality jobs in the UK, and any reduction

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Speaker 4: in volume is a direct effect on jobs. We have

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Speaker 4: two point six million people in the manufacturing sector and

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Speaker 4: it's that effect really not just the direct effect, but

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Speaker 4: just to go through that again, kind it is that

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Speaker 4: indirect effect of what happens with the EU volumes, which

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Speaker 4: is about half of the exports of manufactured products from

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Speaker 4: this country.

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Speaker 1: Stephen, We've had analysis from Bloomberg Economics talking about the

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Speaker 1: percent of exports from the EU that are now at

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Speaker 1: risk to the US. They see them dropping by nearly

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Speaker 1: fifty percent, and then even China's exports to the US

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Speaker 1: dropping by eighty percent. You know, these countries are going

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Speaker 1: to try to scramble to figure out where else they

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Speaker 1: can sell these goods. Are your members worried about perhaps

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Speaker 1: the dumping of cheaper goods into the UK economy, perhaps

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Speaker 1: putting your business model at risk or under pressure.

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Speaker 4: Yeah, we are certainly concerned about trade diversion. I mean

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Speaker 4: we have been experiencing that anyway in the steel sector,

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Speaker 4: and the UK's had a pretty good safeguarding regime that's

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Speaker 4: responded quickly to dumping, for example, of Chinese steel into

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Speaker 4: the UK when when steel is diverted from one market

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Speaker 4: which they're restricted from and we have an open border,

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Speaker 4: and of course what they're going to have to do

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Speaker 4: now is extend that to look at other products where

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Speaker 4: we have a significant trade diversion effect. So again we're

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Speaker 4: going to need to really ramp up the response of

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Speaker 4: that agency in the UK to be able to put

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Speaker 4: in the right safeguards, the appropriate safeguards when those issues arise.

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Speaker 3: But we are experienced of doing that in steel, for example.

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Speaker 2: You could well out something quite tough against the US.

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Speaker 2: We don't know. France is a manual MACO urging European

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Speaker 2: companies to pause spending in the US. The UK's got

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Speaker 2: potentially this kind of choice, does it try to get

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Speaker 2: closer to the EU or closer to I end up

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Speaker 2: closer to the US A lot of people I know,

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Speaker 2: So that there isn't a choice, but there surely is.

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Speaker 4: What's your view, Well, we are stuck between both of them,

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Speaker 4: to be honest with you, and I know the government's

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Speaker 4: been treading a really fine line on this issue.

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Speaker 3: But as I said, we have you know, the.

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Speaker 4: US as a single market is the most important export

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Speaker 4: market for UK goods. The UK as a block is

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Speaker 4: the biggest trading partner, so the massive volumes that go

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Speaker 4: to the U. So ideally the government's trying to find

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Speaker 4: this real really this sweet spot, this fine line in

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Speaker 4: between the two, to be able to not choose. But

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Speaker 4: you'll hear that phrase constantly from the government, not choosing

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Speaker 4: between one partner and another, and they will continue to

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Speaker 4: try to do that, but I think it's going to

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Speaker 4: be increasingly difficult if we see retalia from the EU.

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Speaker 1: Steve and I just want to pivot the conversation to

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Speaker 1: defense because that's I guess an area that not only

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Speaker 1: in the UK but also in Europe is likely to

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Speaker 1: be seeing big investment inflows. Is the UK manufacturing perhaps

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Speaker 1: make up some of this some of this capacity from

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Speaker 1: the Trump tariffs with defense?

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Speaker 4: Well, defense is growing anyway substantially, as you can imagine

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Speaker 4: at the moment, we're seeing some significant growth in the

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Speaker 4: defense sector. We're also very interested in this idea of

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Speaker 4: collaboration across Europe, and there's a lot of discussions around

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Speaker 4: what we might do with other European countries, and we've

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Speaker 4: already got experience of doing that. We do that with

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Speaker 4: complex weapons, with missile systems for example, NBDA would be

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Speaker 4: a very good example of that. We've done it with Typhoon,

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Speaker 4: and there's a real discussion about how to increase that

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Speaker 4: collaboration across Europe. Interestingly, that might result in actually easing

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Speaker 4: some of the trade barriers that we've got with Europe

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Speaker 4: at the moment, because if you start doing things across

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Speaker 4: border on defence in more volume, you might end up

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Speaker 4: having a better regime for customs and those sorts of things.

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Speaker 4: So it might be a way of easing some of

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Speaker 4: those tensions. But we certainly see demand increasing at the moment,

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Speaker 4: and I think that collaborative collaboration across Europe is going

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Speaker 4: to be a good thing for UK manufacturing and defense.

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Speaker 2: Do you think that there's going to be a major

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Speaker 2: dampening effect in terms of manufacturing as a result of

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Speaker 2: the whole tariff regime and not just that the major

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Speaker 2: change in thinking, the rewiring the entire foundations of the

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Speaker 2: global trading system, that the trust being lost. Do you

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Speaker 2: think that that has a dampening effect for your members

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Speaker 2: on what they do?

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Speaker 4: Actually what it really has an effect on, and that's investment,

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Speaker 4: because investment cycles and manufacturing are long. You know, it's

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Speaker 4: between seven and thirty years in terms of investing in

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Speaker 4: new factories, new plant and machinery, those sorts of things.

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Speaker 4: And in this environment where you're not sure, I mean

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Speaker 4: with the Trump tarifs, we're not sure if that's going

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Speaker 4: to last a month, six months, a year, is it

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Speaker 4: going to change. Do you build your factory in the

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Speaker 4: US the next factory expansion, do you build it somewhere else?

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Speaker 4: And so going to be very uncertain about that investment

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Speaker 4: part which drives your manufacturing efficiency, and that's going to

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Speaker 4: have a significant dampening effect unless there's some clarity in

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Speaker 4: this in the short term