Long one of the less touted aspects of the British economy, the UK manufacturing industry has recently roared back into the public conversation. Side-lined by a booming services economy and not one of the more glamourous areas of the economy, the Brexit vote has resurrected focus on the sector, with various sides either claiming that it’s doomed if we go it alone in the world or could become the centrepiece of a renewed United Kingdom.
The months following the Brexit vote have been fascinating, as the weakened pound has spurred on purchases of British product from abroad but held back companies from investing in themselves as uncertainty set in.
Now, a new report from the manufacturers’ organisation EEF claims that manufacturers are seeing a “delayed recovery”, with increased output and orders along with a boosted optimism for jobs. They claim that the sector is now regaining ground after what they described as a “sluggish” 18 months. Despite this, they said that manufacturing will contract in 2017.
The organisation which polls British manufacturers lie us who produce dowty seals said that the pressures of inflation and the significant price rises in the pipeline are factors which will weigh heavily on domestic activity during 2017.
EEF chief economist, Lee Hopley said: “This is the most upbeat reading on the state of manufacturing we’ve seen for some 18 months and signals the start of brightening conditions, which had been briefly knocked off course following the referendum.
“This anticipated turnaround can be attributed to a range of factors including the resilience, thus far, of the UK economy but also the strengthening of demand in a number of major markets. Critically, this should spur some new investment and recruitment activity to fulfil new customer demands.”
In 2017, the EEF expect manufacturing output to fall by 0.2%, and the economy as a whole to grow by a modest 1.3% as Brexit negotiations begin to hit harder on the economy.
Disappointingly, the new chancellor Mr. Phillip Hammond chose not to use the Autumn statement (his first in charge) to discuss reform for the manufacturing sector. Groups within the sector had gone on record suggesting that red-tape removal and tax breaks would help shore up the industry for the darker days ahead, and it was widely expected that manufacturing would get a nod during his statement.
Unfortunately, no such mention came around. The chancellor has spoken about the fact he has “no doubt” that Britain can strike a free trade deal with the likes of China, but the government seem cagey about the prospect of a free trade deal with Europe, who purchase around half of the UK’s exports.
Nevertheless, Britain remain in the EU for the time being having not trigged Article 50 yet. To date, only Nissan have been made promises regarding the UK’s future in regards to trade deals, with the rest of the manufacturing industry enduring a cloud of uncertainty which is likely to continue to dampen profits.