East Midlands manufacturers are continuing to cut back on investment in response to the impact of the pandemic, according to a major survey published today by Make UK and business advisory firm BDO.
According towards the Make UK/BDO Manufacturing Outlook Q3 survey, the total amount on investment intentions was reported at -23% in the last quarter. Whilst the level wasn't quite as bad as that for the last quarter and better than the UK average, the continuing severe impact on future investment is likely to hamper the efforts of companies to consider advantage of any recovery.
Furthermore, Make UK 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 harm to investment prospects in the latter part of the year.
The impact of COVID-19 also took a heavy toll on company order books and output in the East Midlands with the balances for orders and output falling to -35% and -32% respectively.
Output levels particularly are reflecting the continued severe difficulties being experienced by the automotive and aerospace sectors and their supply chains. In response to the difficult trading environment, the prospects for recruitment have also been dealt a heavy blow using the proportion of companies intending to recruit falling sharply.
Looking forward, because of the impact on the sector Make UK is now forecasting that manufacturing output will fall by almost 11% this year while it has downgraded its forecast for recovery in 2021 by greater than a full percentage point from 6.2% to 5.1%. GDP is forecast to fall by -8.5% this year before recovering by +10.1% in 2021.
Charlotte Horobin, Region Director for Make UK in the Midlands said: “Manufacturing has begun to climb away from the abyss that it stared into earlier in the year. But, make no mistake it is going to be a long haul back towards normal trading conditions, with talk of a V shaped recovery simply fanciful.
“Having emerged from three 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 will follow in already hard hit areas and sectors, it is crucial that the first step towards a fuller recovery is supplied by a comprehensive trade agreement with the EU.”
Jon Gilpin, Head of Manufacturing at BDO within the Midlands said: “The fact that so many businesses over the region are losing their appetite to take a position is a real cause for concern. With a no deal exit in the EU – and associated logistics, customs and price implications – looking increasingly likely, British manufacturers will have to step up a gear to be able to compete internationally, and this will require significant investment in productivity and digitalisation improvements.
“No-one is within any doubt about the financial challenges facing manufacturers, but failing to invest now will have serious medium to long-term implications. The Government must be alive for this risk and provide the support necessary to help UK manufacturers through this transition period and beyond. Other countries – Germany in particular – provide good examples of consistent long-term support to their manufacturing sectors. The united kingdom should look to adopt a similar approach.”