The latest report from manufacturers’ organisation EEF has painted a worrying picture for UK operators, with exports, investment, confidence and recruitment all trending downwards.
Produced in partnership with BDO, the survey covered 329 companies from 31 October to 21 November. Uncertainty over Brexit, combined with slowing global growth and a move towards protectionist trade policies, saw the export balance halve from Q3 to Q4 (+24% to +12%). Domestic demand fell less dramatically, slipping from +14% to +11%. According to EEF, anecdotal evidence suggests many companies are stockpiling inventory ahead of the UK’s departure from the EU, which may be artificially inflating the domestic figures. The Q4 collapse in international demand reflects the waning impact of sterling’s devaluation, along with wider global uncertainty.
“There are likely to be a number of causes for the fall in exports this quarter; uncertainty over our future relationship with the EU being the main one,” said Tom Lawton, head of Manufacturing at BDO. “In addition, more subdued global growth, the fading effects of sterling devaluation and the rise of protectionist policies appear to be starting to take their toll on growth.
“Overseas demand has helped sustain manufacturing growth over the last few years and the EU remains the most important trading bloc for UK manufacturers. It is crucial that Britain is seen to be open for business with the EU and other key global markets. The result of the ‘meaningful vote’ next week will dictate the government’s next steps and hopefully provide some much needed certainty as we enter the new year.”
As a result of the weaker overall picture, employment and investment indicators have dropped significantly. Both remain in positive territory, but recruitment intentions have slipped to +12% from +21%, whilst investment intentions have seen a sharp decrease from +20% to +7%. EEF said these figures are in line with official data for business investment, which is set to show a fall across 2018.
“The moderation in manufacturing performance over the course of this year appears to have gathered pace during the final quarter with more clouds on the horizon than there have been for some time,” said EEF chief executive, Stephen Phipson.
“This should come as no surprise given the significant political uncertainty at home which is why it is essential that there is an agreement for the UK’s withdrawal as soon as possible. If everything that can go right does, then business and consumer confidence should hopefully gather some steam next year with improved prospects for growth. That’s the backdrop we’re working to, let’s hope it’s the right one.”
The full report can be viewed here.
We’re probably heading towards a global recession fairly soon. Recruitment appears to be slowing down across various industries and there will probably be a rise in interest rates soon, which will, of course, hit investment. Hopefully the US and China will calm down with the brinkmanship when they see the signs on the horizon.
Of course, in order to maintain one’s credentials as a member of the “sensible” class, one must say this is all because of Brexit.
The EEF, once roled by the EU-zealot Terry Scuoler, is always wrong – not least because big PLCs pay most of its fees. Second – the ONS says ‘UK exports are up £111m’, a true export explosion, which of course, the FT and Economist won’t mention.. SMEs of this great nation will surely save us from the octopoid clutches of EU politicrats.
There’s nothing that can save us (or the EU) from a global down-turn, which is likely coming soon. The UK has had a great run in terms of foreign investment and industrial growth since the some-what recovery of the last global recession, so that will help a lot, but with so much private debt being held and the most incompetent political leadership in living memory, a lot of people are going to suffer quite badly.
It is easy to manipulate the figures to make them represent whatever political narrative you happen to be peddling, either by omitting to report some numbers or by allowing currency fluctuations and suchlike to distort the true picture or just by influencing the report using the rationale of he who pays the piper calls the tune.
I agree with Marcus though, it is the SMEs that are perhaps under-represented by government trade bodies and those who influence policy that will play a key role.
One observation that is noteworthy, if these numbers are to be believed, is that despite our now being at a point of maximum uncertainty there is still an appetite for investment and hiring.
Either this is a Wylie Coyote moment or it is a hugely positive indicator for what is to come once our politicians finally extract their heads from their own rear ends.