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South: BDO warns manufacturing 'at risk of investment paralysis'

By Dan Teuton
3 June 2019

South East manufacturers are seeing mixed prospects as a survey shows the impact of the uncertainty of Brexit dragging on.

According to the Q2 Manufacturing Outlook survey published by Make UK, The Manufacturers’ Organisation and business advisory firm BDO LLP, output and orders have been in positive territory in the region in the last three months.

It remains to be seen, however, how far this picture was in response to the boost of artificial stockpiling ahead of the two potential dates for leaving the EU that passed in March and April.

The mixed picture for the sector across the region was highlighted by the fact that, although business confidence among South East firms remains higher than the UK average, both recruitment and investment fell in the last three months - the latter almost into negative territory. Both these factors may indicate an expectation of a weakening picture for South East firms in the second half of the year.

Overall, Make UK is now forecasting manufacturing growth of just 0.2% in 2018 and an anaemic 0.8% in 2020. GDP is forecast at 1.2% in 2019 and 1.6% in 2020.  

Commenting, Seamus Nevin, chief economist at Make UK, said: “Whilst the data at first glance makes for reassuring reading there is a clear weakening trend which, if it continues, would push some elements of industry into negative territory before too long.

“Earlier this year there was clear evidence that industry was on steroids as companies stockpiled. Underneath, however, there is growing evidence that global customers are moving away from the UK as concerns over Brexit and trade agreements continue.

“With this outlook, it would be the height of economic lunacy to take the UK out of the EU with no deal in place. This race to the bottom in the interests of party ideology has to stop otherwise there will be a heavy price to pay.”

Arbinder Chatwal, head of manufacturing at BDO in Southampton, said: “Of real concern is the drop-off in investment intentions by local manufacturers. Official data shows a consistently downward trend in investment intentions since the EU referendum in 2016. The impact is severe, with UK manufacturing at risk of investment paralysis as the uncertainty of Brexit drags on.

“Manufacturers need to prepare for a more digitally-fluent future, both in terms of the technologies they deploy and the people they employ, but right now companies are not overly confident of a future worth investing in.

“Stockpiling is dying down and export orders continue to fall away as global competition increases. Combine that with a government mired in chaos and we’re now starting to see a true reflection of the crippling anxieties the sector is facing.”

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