Throughout the EU referendum, it became clear that the UK’s manufacturing industry would be a lightning rod for the after effects of the vote. If we were to stay, we heard, we’d see the industry strengthen amid greater international confidence. If we left, we were told, we’d see an immediate drop in inwards investment and overseas orders.
Whilst we now know that the UK voted to leave, we’re still bracing ourselves for the exact impact that Brexit will have on manufacturing, but it’s clear that in the three months before the vote, it was already having a negative effect on output.
A new study on industrial trends by the CBI has found that manufacturing output in the UK eased back in the three months to July, growing at an even slower rate than in the three months to July and painting a grim picture for the beleaguered industry going into the referendum. It had been mentioned by analysts at the time that the uncertainty that surrounded the referendum would affect overseas orders, and it now appears that that was most certainly the case.
The study of 505 manufacturing firms will come as little surprise to those who pay attention to the market, but will nevertheless illustrate the very real fears that were felt around the world in the build up to the EU referendum.
It’s not all bad news for UK manufacturers, because thanks to the collapse in the value of the pound, buying British made products is cheaper than it has been in a very long time, leading to British exports rising to their highest level in two years during August. The CBI found that whilst overall orders dipped slightly in August, orders from overseas improved to -6, up dramatically from -22 and at their highest levels since August 2014.
Whilst that’s obviously good news for businesses like ours which ships custom fittings like dowty seals around the world, it’s also a double edged sword. Anna Leach, the CBI’s head of economic analysis and surveys explains: "It's good to see manufacturing output growth coming in stronger than expected, and some signs that the fall in sterling is helping to bolster export orders.
"But the pound's weakness is a double-edged sword, as it benefits exporters but also pushes up costs and prices," she added.
Those higher cost and prices have meant that the UK’s manufacturing industry have found the boon in overseas purchases difficult to profit from, and it’s expected that manufacturing growth in August may well be in the negative figures once again as it sheds profits and employees.
Much of the future of the UK’s manufacturing industry will rest on the decisions made by the new Prime Minister and her government, but as we await to see the results of the ongoing negotiations with Europe, it’s clear that manufacturing is going to need help to get back to its feet.