Manufacturers are reporting mixed fortunes after Britain voted to leave the European Union, according to a survey published today by EEF, the manufacturers’ organisation, and business advisers BDO LLP.
However, Yorkshire has bucked the trend, with the region’s manufacturers increasing output and looking to hire more workers, despite the uncertainty caused by Brexit, the survey found.
Across the UK, while activity levels remain largely unchanged from the second quarter, manufacturers’ confidence about the UK’s economic prospects have taken a knock, leading the EEF to downgrade its growth forecasts for both the economy, and the manufacturing sector, for this year and 2017.
In contrast, however, the export picture looks more positive off the back of the fall in sterling and stronger demand from the EU, the US and emerging markets.
As a result of the depreciation in sterling, manufacturers are more positive about exports.
However, the flipside of sterling’s depreciation has been increased pressure on profits this quarter, with price increases planned for the next three months. Manufacturers expect that output and orders balances will finally move into positive territory by the end of the year. This supports plans for recruitment across some sectors in the next three months, but it is not sufficient to prompt a turnaround in investment plans, the survey concluded.
The EEF’s forecasts for UK growth were revised in July, following the EU referendum. Its growth projections for the economy for this year and next remain unchanged at 1.7 per cent and 0.8 per cent respectively. However, forecasts for manufacturing output have been revised up to 0.4 per cent in 2016, from -0.3 per cent in July, and -0.7 per cent in 2017, from -1.1 per cent
Andy Tuscher, Yorkshire and Humber region director at EEF, said: “Manufacturers’ confidence collapsed in the aftermath of the referendum, but our latest survey provides some relief that this has corrected.
“Signs of an export revival are helping to drive more optimism about activity in the second half of the year, but concerns about whether the UK economy can shrug off post-referendum challenges are still clearly evident. These risks are expected to hit some sectors, such as industries linked to investment goods and construction, harder than others.
“Despite the short-term outlook for manufacturing remaining broadly stable, the continued downward slide in investment plans should keep policy makers alive to the potential risks facing the sector.
“The Government needs to proceed quickly in developing an ambitious industrial strategy to make the UK an attractive proposition for future manufacturing investment. This will become even more critical once negotiations to leave the EU begin and Article 50 is triggered.”
Jason Whitworth, corporate finance partner and head of manufacturing at BDO in Yorkshire, said: “While the outlook for the UK economy remains uncertain, manufacturers are more confident about their own business performance and it’s promising to see manufacturers in the Yorkshire and Humber region have experienced increases in output over the last quarter.
“This shows they believe there is a positive way forward from here and that Brexit might not have been the portent of recession.
“Some sectors are clearly facing longer term structural challenges where global factors are at play and these are unlikely to abate anytime soon.
“However, history shows that in difficult economic circumstances there are always sectors and companies that thrive on being driven to innovate, develop new products and search out new markets and customers.”