It’s not a secret that the UK’s manufacturing industry has never truly recovered from the financial crash of 2007-08, but opinions on why that might be have been varied. In the past it’s been argued that the financial crash merely hastened what has been a general decline in the size and importance of the UK’s manufacturing industry. However, not everyone shares that view.
Indeed, a new report from respected industry body EEF has said that the UK’s manufacturing industry is suffering from a “hangover” from the days of the credit crunch that has hampered investment in the sector.
In their report that say that whilst most manufacturers are confident in their ability to secure finance, only a third are more likely to borrow now than they were two years ago, revealing a lack of growth prospects within the manufacturing industry. The EEF also revealed that 53% of firms would postpone if cancel their investments of they couldn’t use their own funds.
Manufacturing had grown gradually from 2005 to 2008, but took a huge dive during the financial crisis along with the rest of the economy. It grew slightly between 2010 and 2012, but its growth has been patchy at best since then, and recently hit a three and a half year low as it contracted in July.
The EEF suggest that firms are turning away from traditional bank funding in favour of self-financing investment projects, a trend which could lead to lower investment levels across the sector and stall future growth in a post-Brexit environment.
Lee Hopley, the EEF's chief economist, said: "Manufacturers' reluctance to rely on external finance is a persistent hangover from the credit crunch, where trust and confidence in the banks stalled and never quite recovered.
"But with the Brexit vote dampening investment intentions and adding to uncertainty, this pre-existing condition could now become further aggravated, posing a risk for growth.”
So far in August, we’ve seen massive numbers of overseas purchases of British made products thanks to a weakened pound, but heard of the struggles that many British manufacturing businesses are having thanks to the increased costs of purchasing materials from around the world and decreased bulk and large orders from overseas has decreased. As one of Europe’s leading stainless pipe fitting suppliers, we’re particularly sensitive to changes in the market and we have indeed felt the uncertainty that has rippled through the markets.
BDO LLP have proposed that though business confidence may well be at a three year low, it’s actually better than they might have thought it would be after the Brexit vote. Peter Hemington of BDO said “Brexit has compounded the continuing slowdown of the UK economy, but there is opportunity as well as challenge ahead for UK businesses.
"The Bank of England's decision to lower interest rates is a step in the right direction. We now need a concerted effort from government to lay the foundations for future growth.
"That means taking advantage of cheap borrowing costs to invest in UK infrastructure, encouraging prosperity across the regions and improving productivity."