Industry grinds to a standstill in face of political uncertainty, survey

A survey released by Make UK, the manufacturers’ organisation, and business advisory firm BDO, has revealed that a quarter (25.7 per cent) of companies view increasing investment allowances as the main priority for the new government, with a fifth believing cuts in corporation tax should be the priority.

According to the findings, while manufacturers’ confidence in the economy has picked up slightly on the back of a ‘no deal’ being avoided at the end of October, this respite is most probably temporary.

“Uncertainties about the outcome of Brexit and the impending general election continue to weigh on the UK manufacturing sector but the build up to Christmas has brought a much needed boost,” said Stephen Phipson, chief executive of Make UK.

“Firms are reporting weaker business activity overall, especially from the domestic UK market but export orders have increased slightly this quarter, indicating greater confidence from foreign customers about purchasing UK goods as concerns about an end of year no deal Brexit fade.”

Head of manufacturing at BDO Tom Lawton said that while investment levels have slightly improved this quarter, firms are still facing an uphill battle.

“Investment is critical to UK manufacturing. The sector is facing increased global competition and major change in respect of industry 4.0 and sustainability,” said Mr Lawton.

“An increase in first-year capital allowances – something that a quarter of companies see as a priority for the new government – would be a good incentive to boost capital investment in 2020 and beyond. This should be considered as part of a long-term sustainable industrial strategy.”

According to the Make UK/BDO survey, the total order balance, while still just about in positive territory, fell to just +1 per cent. This continues the downward trend seen throughout the year when it has fallen respectively from +16 per cent to +8 per cent and +2 per cent in the three previous quarters and compares to the turbocharged performance in 2017 when it peaked at +37 per cent.

Output did, however, increase slightly from +4 per cent to +11 per cent but, given the survey period took place in the immediate run up to the last Brexit deadline of 31 October, BDO explained it is highly likely this period was accompanied by some stockpiling.

As a result of this weak picture, Make UK is now forecasting manufacturing growth of just 0.1 per cent in 2019 and downgraded to 0.3 per cent in 2020 (down from 0.6 per cent). GDP is forecast at 1.3 per cent in 2019 and 1.4 per cent in 2020.

The survey of 339 companies was taken from 30 October to 20 November.