AROUND THE REGIONS MARCH 2019
AROUND THE REGIONS:
A NATIONAL VIEW
While manufacturers across many regions of the UK are enjoying increased output
and productivity, there are signs that Brexit uncertainty could bring this to a halt
BY LORRAINE DURING, BUSINESS ENVIRONMENT POLICY ADVISER, MAKE UK
With time ticking on the Brexit
countdown clock, the uncertainty
concerning the future of UKEU
relations and the possibility
of a no-deal scenario has led
businesses to set in motion
various contingency plans to deal with any
related fallout.
For the past few months we have been hearing
reports that manufacturers are stockpiling both
raw materials and finished goods, with recent
figures showing that British manufacturers are
stockpiling goods at the fastest rate recorded
in G7 history. Coupled with multinational
automotive companies such as Honda and
Nissan announcing that they are closing or
reducing their UK manufacturing activity, and
other automotive makers threatening to do the
same, UK manufacturing is going through a
particularly turbulent time.
There are however, some small rays of
sunshine peeking through the Brexit storm.
When surveyed, bosses report that they
are still planning to invest in the UK, for now
at least. At the same time manufacturing
output remains stable, albeit largely a result
of stockpiling activities as opposed to genuine
customer demand.
However, worryingly, for the first time
since 2016, domestic orders are stronger than
exports, and orders from Asia are also down.
Whilst this is certainly tied to uncertainty from
overseas customers who hold the same fears as
UK manufacturers – that goods will be delayed
or even stuck at ports and borders in the event
of a no deal Brexit – the emerging economic
slowdown throughout the rest of Europe is also
playing a part in this.
A complex regional picture
Regionally, the picture is not straightforward
either. Although business confidence levels
remains high, six out of the ten regions have
seen slight decreases in their level of confidence.
Notable is the West Midlands, the only region
to see decreases in output, employment and
investment indicators from the last quarter.
The high proportion of metal and motor
vehicle manufacturers in the
region, many of which form an
important part of automotive
supply chains may be partly
to blame for this. Carmakers
are not only under threat
from Brexit. They are also
suffering from a decrease in
international orders as a result
slowing global purchases.
The North East recorded
a pickup in the number of
orders, but suffered a decrease
in employment following
the decision of several local
manufacturers, notably
Nissan, to move production
away from Sunderland.
A troubled picture
Overall, the general outlook
for UK manufacturing is that
although output and orders
remain positive, they are
The next 12
months are set
to be tough for
the sector, says
Lorraine During
ominously trending down.
As businesses prepare
themselves for Brexit, output
remains above its long term
average, but orders have
significantly decreased. The
nervousness of firms over
what to expect after 29
March, as well as other
global factors, including a
potential US-China trade
war, has led to a slowdown.
Although our forecast
assumes a smooth transition
through Brexit, several
manufacturing firms have
already paid at least part of
the price, and along with
the economic slowdown
that we are seeing globally,
2019 is likely to be a year of
contraction for the sector,
which we expect to pick up
only from 2020.
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