With fears of a no-deal Brexit growing, UK manufacturers are feeling less confident about the future than they were this time last year according to a major survey by EEF and insurer AIG.
The EEF/AIG Annual Senior Executive Survey – which spoke to 242 companies and was carried out from 1 to 21 November – shows that whilst companies still expect to see growth in domestic and export orders, as well as employment, in the coming year, they are much less confident than they were a year ago.
Almost three quarters of manufacturers (72 per cent) say that Brexit it is their biggest source of uncertainty, with 81 per cent of this group identifying exchange rate volatility as a risk to their business plans.
Furthermore, the impact of a weaker sterling bringing upward pressure on input costs was also seen as a risk by three quarters of companies. This counters a perception that a weaker sterling would be of universal benefit to manufacturing
The survey also shows that delays at customs was a risk for almost four fifths of companies (76 per cent), highlighting the critical need to pursue a Brexit that brings frictionless trade whilst almost half of companies saw a relocation of a major customer away from the UK as a source of risk.
Actions to mitigate the direct impact of Brexit include an evaluation of suppliers inside and outside the UK (68 per cent and 63 per cent respectively) and stockpiling components/raw materials. Over six in ten companies are looking to stockpile (62 per cent) with 29 per cent already doing so and a further 33 per cent planning to do so in 2019.
Calling on MPs to back Theresa May’s deal in next week’s planned vote (15th Jan) EEF chief executive Stephen Phipson said: “While companies are naturally optimistic by their very nature, the spectre of Brexit is now very front of mind for manufacturers……Business is crying out for some certainty and clarity on moving to a transition period and will have watched the pre-Christmas pantomime in Parliament with dismay. This situation cannot continue.”
Other causes of concern flagged by the report include the impact of increased trade protectionism, which was identified as a major concern by 59 per cent of respondents; and the threat posed by cyber-attacks, a significant worry for 63 per cent of those taking part in the survey.
Commenting on this, Simon Gallimore Manufacturing Industry Group Lead of AIG, said: “As technology and data continue to play increasingly critical roles in the industry, companies will inevitably find themselves more vulnerable to cyber breaches, which can cause severe disruption to the supply chain.”