The Brexit factor cutting manufacturing investment

Brexit uncertainties have resulted in investment by UK manufacturers falling to its lowest level in a year, although recruitment in the sector remains buoyant, according to a recent survey.

Manufacturing skills in the UK
A survey of more than 300 companies by the manufacturers’ organisation EEF and business advisers BDO found that while business confidence was still strong, there was a “downward drift” in the second quarter of the year from very strong picture in 2017.

Why has manufacturing investment dropped?

According to the EEF/BDO Manufacturing Outlook Q2 survey, manufacturers continue to have positive expectations for the second half of the year. “However, the combination of an easing of global growth and increased political uncertainty at home and abroad, has pushed the output balances in some sectors down from the lofty heights of last year.”The report said that whilst recruitment and investment were still positive, the latter had fallen to the lowest level for a year. “This is very much at odds with the picture EEF would hope to see given the expectations of continued output growth and emerging capacity constraints, which suggests that the continued political uncertainty of Brexit negotiations is weighing on business investment.”Lee Hopley, EEF chief economist, commented, “We continue to see signs of growth across manufacturing and, given weaknesses elsewhere in the UK economy, it is vitally important that we sustain this.“However, the durability of this upturn is looking somewhat more fragile as many of the positive forces driving expansion last year such as a resurgent eurozone, a surge in global manufacturing investment and competitive pound are starting to fade.“New or heightened uncertainties have also come into play, not least what feels like crunch time in the Brexit negotiations, which have led to amber lights flashing again on the business investment outlook. This matters both for growth now and our longer term productivity prospects.”
Related stories:For more related news and features, visit our Brexit section. 

Encouraging investment in the sector

Tom Lawton, head of BDO manufacturing, added, “Following a record-breaking 2017 and a strong start to 2018, we are starting to see the impacts of the ongoing political and economic uncertainty on the UK manufacturing sector. However, despite the sector’s slowing performance this quarter, manufacturers – which are the economic engine of the UK economy – still remain cautiously optimistic about the future.“It is now more important than ever for the government to not lose sight of the needs of manufacturing, or indeed the wider economy, during the continuing EU negotiations. I have no doubt that UK manufacturing will continue to be successful but the right support and trading environment will make a huge difference to manufacturers.“Having more transparency from the government will give them the confidence to invest in skills, automation and digitisation, which are so important to the future of UK manufacturing.”A spokesman for the Department for Exiting the EU said, “We have made significant progress on negotiations so far and continue to work hard and at pace to deliver the Withdrawal Agreement.“We know the importance of providing certainty to business as the UK leaves the EU, which is why we’ve successfully negotiated an implementation period – a key ask of businesses on both sides. This means firms will be able to trade on the same terms as now up until the end of 2020.”Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Global Mobility Toolkit download factsheets resource centreAccess hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online Directory