East Midlands manufacturers are continuing the long road back towards growth from the historic lows experienced earlier in the year, according to a major survey published today by Make UK and business advisory firm BDO.
However, the survey also shows the brutal impact of the pandemic with the sector forecast to determine a 12% drop in output nationally this year, while Make UK has also substantially downgraded its growth forecasts for that sector overall for 2021.
A bumpy road also is coming up next with a darkening outlook for exports ahead of the final departure of the UK from the EU, with the motor vehicles sector particularly especially fearful of the potential impact associated with a tariffs from ‘no deal’.
According towards the survey output in the East Midlands increased significantly to a balance of +11%, substantially ahead of the national average, possibly reflecting the exposure of the Region to the Food and Drink sector that is performing well nationally.
This is also reflected in the positive picture for UK orders, while the picture for export orders is substantially more negative, reflecting the East Midlands exposure to the EU where the picture has darkened nationally ahead of the end of the transition period.
Despite the gradual improvement running a business conditions, recruitment intentions continue to be negative although on a better note investment intentions are far more positive and ahead of the national picture.
Charlotte Horobin, Region Director for Make UK in the Midlands said: “Manufacturing has stepped back in the abyss that it stared into earlier around. But, make no mistake it is going to be a long haul back, with talk of the V shaped recovery nothing more than fanciful.
“However, having endured over four years of political uncertainty, combined with pandemic many in industry are feeling like an exhausted boxer in the final round of a bout, with a ‘no deal’ exit from the EU potentially resulting in a knockout blow.
“Should this happen the nascent recovery is likely to get into reverse, with significant damage to manufacturing and job losses following in already hard hit areas and sectors. It is crucial that the first step towards a fuller recovery is supplied by a comprehensive tariff and, quota free, trade agreement using the EU with a sensible selection of easements to allow business some time to adapt.”
Jon Gilpin, Head of Manufacturing at BDO in the Midlands, said: “Following a torrid year, manufacturers in the East Midlands who rely on Continental supply chains and export markets now face a race from the clock to prepare for the end from the transition period.
“The prolonged negotiations with the EU have made this far more difficult than it should have been. Manufacturers are now desperate for greater clarity so that they can be released from the post-referendum paralysis which has managed to get nigh-on impossible to take long term decisions.”
In response to the continued impact of the pandemic on the sector and the fact recovery will probably now be more drawn out, Make UK has substantially downgraded its forecasts for manufacturing growth to just 2.7% in 2021, down from 5.1%. GDP is forecast to contract by 11.3% in 2021 and grow 5.4% in 2021.