Strong year for manufacturing masks future concerns regarding investment and trade outlook says new report

According to new analysis published by EEF, the manufacturers’ organisation and accountants and business advisory firm BDO LLP, Britain’s manufacturers have enjoyed a strong performance across all parts of the UK in the last year on the back of buoyant world markets.

However, there are concerns whether this will be maintained in the coming year, with three factors potentially driving greater divergence in regional manufacturing performance.

These include the risk of a Brexit, the emergence of global trade tensions and the relatively weak investment picture, which could compound regional productivity differences.

The EEF/BDO annual Regional Manufacturing Outlook highlights the breadth of manufacturers’ contribution to the economic areas of the UK in terms of output and jobs.

The report displays by destination, numerous regions have strong exposure to the EU making them potentially vulnerable to a hard Brexit.

These include Wales where two thirds of all manufacturing exports go to Europe (60 per cent to the EU), the North East (59 per cent to the EU), East Midlands (54.9 per cent to the EU) and East of England, (52.5 per cent to the EU).

By contrast other regions have greater exposure elsewhere, with the North West being the biggest exporter to the Middle East and North Africa, and the West Midlands being the biggest exporter to Asia, Oceania and the United States.

London and the Midlands regions fall below the UK average, illustrating that there is still work to be done to get productivity growth back on track.

The report concludes, the outlook for manufacturers in the coming year is uncertain, with investment indicators remaining relatively weak amidst ongoing political uncertainty surrounding Brexit and rising global trade tensions.

“The Government cannot afford to lose focus on the importance of UK manufacturing as we endure the twists and turns of EU negotiations,” said Tom Lawton, partner and head of BDO Manufacturing.

“A long-term, practical industrial strategy that delivers a positive trading environment and helps tackle the productivity puzzle is crucial. Without that the sector will struggle to have the confidence to invest in skills and automation, which are so important to the future of the UK manufacturing.”