Fears over new relationship with EU cloud outlook for manufacturers – Finance-Base
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November 26, 2021
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Fears over new relationship with EU cloud outlook for manufacturers

Fears over the impact of the UK’s new trading relationship with the EU and the attractiveness of the UK for both investment and talent are clouding the outlook for manufacturers because they enter 2021, according to a major survey published today by Make UK and PwC.

However, regardless of this, more companies believe the opportunities outweigh the risks for their businesses given significant investments in boosting productivity and agility, while manufacturers are also more confident about the prospects for their own companies than they are for either the global or UK economies.

The 2021 Make UK/PwC Executive survey shows that a third of companies believe an investment prospects for UK businesses will decrease having left the EU with only 18% of companies believing they will increase. In addition, just over a quarter of companies (26%) believe exports towards the EU will fall with only 16% believing they will increase.

Furthermore, a third also believe the UK’s capability to attract international talent will decrease with only 11% believing the UK will be a more appealing destination outside the EU. Based on Make UK this potentially puts in danger the ambition of the Government’s new immigration system which is specifically designed to encourage the best talent arrive at the UK.

The survey also implies that customs delays are seen as the biggest risk to companies (47%) while concerns over national and native lockdowns were the second biggest risk (46%). Furthermore, increased costs of regulation is reported because the biggest risk by just under forty percent (39%) while over one in 10 companies (14%) also believe a relocation of the major customer out of the UK is the biggest risk.

Stephen Phipson, Chief Executive, Make UK, said: “The transition to new trading arrangements with the EU was always going to be the biggest challenge facing manufacturers this year and the fact we have an agreement in place doesn’t alter that. However, just as the sector rose to the challenge of aiding the national effort at the start of the pandemic, it's clearly set to do so again as we re-build the economy and make use of the opportunities from digital technologies.

“To make sure we cement the role of industry later on economy we need to see a strategic vision from Government for the entire economy across the UK. This must go way beyond short term tinkering and involve an industrial strategy that takes at least a decade long horizon with the whole of Government putting its shoulder to the wheel to deliver it.”

Cara Haffey, PwC UK’s Manufacturing and Automotive Leader, said: “The EU trade deal, taken alongside the positive progress with both COVID-19 vaccines, will give business leaders the confidence to start planning for the future with greater clarity.

“While the need to protect supply chains and boost export products has hit the headlines, the services and maintenance trade that supports this has barely been touched upon.  With as much as four in five UK firms either developing or already delivering an enhanced service offering to their clients, it’s crucial companies are able to swiftly respond to our new relationship using the EU, especially relating to people movement, if they're to remain competitive in an increasingly customer focused global stage.

“I discovered it heartening to see that so many respondents are focusing on strengthening business resilience by purchasing their people and diversifying their trade models in 2021. UK manufacturers are resilient by nature and, with the right investor and government support, their agility and drive will assist them to build new trade networks and embrace the clean, green digital revolution, ensuring the UK remains a go-to destination for a lot more years to come.”

Despite the concerns over the new trading relationship using the EU and the attractiveness of the united kingdom 48% of companies see a significant or moderate improvement for manufacturing in 2021.

This is in contrast to how they see the prospects for the UK economy where 56% visit a deterioration, while 46% are more negative concerning the prospects for the global economy.

Furthermore, this positive outlook was echoed at individual company level using more than half (51%) believing the opportunities outweigh the potential risks to their businesses compared with 27% who believe the potential risks are greater. As a result of this, after the falls in 2021 in response towards the pandemic, recruitment is forecast to get – with 44% of companies expected to increase employee numbers compared to 25% who are planning to reduce headcount.

The survey also provides encouraging indicators on the strategies manufacturers are adopting to construct resilience and agility into their business by investing in people, services, markets and technologies.

While controlling costs remains the biggest priority for companies, 57% of manufacturers are investing in new product development with a similar number also planning capital investment, each of which encompassing a significant commitment to digital technologies. Encouragingly, a quarter of companies are looking to re-shore overseas activities while 25% want to identify new or additional suppliers in the UK as a high priority.

People also boast highly on company strategies with 44% committed to training and 37% investing in Apprenticeships despite the difficulties caused by the pandemic. As a result of these investments 54% of information mill expecting to see an increase in their productivity in 2021.

Despite the imminent EU exit suppressing European export expectations for next year, manufacturers are already demonstrating the agility necessary to navigate the uncertain trade environment by proactively searching for novel export opportunities in fresh markets, looking to diversify their trade income streams and build in further resilience to future crises.

Almost another of companies (30%) are planning to enter new markets in 2021. This will see the UK’s trade patterns shift for while they are predicting exports to the EU will fall, almost 40% of companies are looking to expand sales directly into non-EU markets with increases to Asia (27%) and also the United States (28%) the biggest targets.

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