In a fraught battle to stay afloat in the wake of COVID-19, manufacturers have slashed investment despite a boost in output and orders from historic lows last quarter, a significant industry survey has found.
According to the Make UK/BDO Manufacturing Outlook Q3 survey, the total amount on investment intentions fell to -32% from -26% within the last quarter.
Whilst not reaching the levels of cutbacks seen throughout the financial crisis, the trend downwards is carrying out a similar pattern to that seen after 2008 and beginning of 2009.
By way of an indicator as to how far investment has been cut back this year the balance within the first quarter was +20% as industry bathed in what seemed greater political certainty following a general election. The biggest cutbacks were in Yorkshire & Humber, Wales and Scotland.
Make UK also warned that because of the uncertainty surrounding the Brexit negotiations and the very real possibility of ‘no deal’, the combination of that outcome with the continued impact from the pandemic could cause further damage to investment prospects in the latter area of the year.
“Manufacturing has begun to climb from the abyss that it stared into earlier around. But, make no mistake it will be a long haul back towards normal trading conditions, with talk of a V shaped recovery simply fanciful,” said Stephen Phipson, Chief Executive of Make UK.
“Having emerged from 3 years of political uncertainty after last year, increasing talk of the final ‘no deal’ exit from the EU would be a final nail within the coffin for many companies.
“If we are to avoid this and, the avalanche of job losses that would follow in already hard hit areas and sectors, it is crucial that the first step towards a fuller recovery is provided by a comprehensive trade agreement with the EU.”
Tom Lawton, Head of Manufacturing at BDO, added: “No-one is within any doubt about the financial challenges facing manufacturers, but turning an investment taps off now may have serious medium to long-term implications.
“The Government must be alive to this risk and provide the support required to help UK manufacturers through this transition period and beyond.
“Other countries (perhaps particularly Germany) do provide good examples of consistent long term support for their manufacturing sectors. The UK should look to adopt a similar approach.”