New report highlights strong manufacturing performance of UK but this may mask future concerns

A new report from manufacturers’ organisation, EEF, and business advisory firm, BDO, has highlighted that strong performance by the UK’s manufacturing sector may be masking future concerns around future investment and trade.

The past 12 months have been lucrative for British manufacturers, according to the new EEF/BDO analysis, with positive output and order balances recorded across the board. This strong year has come off the back of buoyant world markets, however, concerns have been raised that this positive outcome will not be maintained this coming year as a result of three potentially disruptive factors.

These risk factors include the possibility of a disorderly Brexit, the emergence of global trade tensions and the relatively weak investment picture, which could compound regional productivity differences.

The EEF/BDO annual Regional Manufacturing Outlook reveals the contribution made by manufacturers in terms of output and jobs per economic region of the country. Therefore, illustrating how each regional area may be affected by Brexit and possible tariff increases.

Wales came top of the regions that will be potentially vulnerable in a hard Brexit situation as two thirds of its manufacturing exports for to Europe. Following Wales came the North East, East Midlands and the East of England.

For other regions, however, greater exposure was found to be elsewhere other than Europe. These included the North West, which is the biggest exporter to the Middle East and North Africa, and the West Midlands as the biggest exporter to Asia, Oceania and the US.

Not only does this analysis demonstrate the disproportionate effect Brexit may have on the country’s regions but also shows the impact rising global trade tensions — such as concerns for metal manufacturers in the West Midlands and Yorkshire and Humber as a result of President Trump’s tariff announcements — may have on the country’s manufacturing sector.

Additionally, the report demonstrated the manufacturing productivity of various regions, finding the North West, Scotland and South West all performing well, the former probably as a result of the pharma hub in the region.

“The last twelve months has seen a very strong picture for manufacturing with all parts of the country benefitting from the strength of global markets. While all regions have seen their manufacturing sectors enjoy positive output and orders the investment outlook across the UK has been consistently, and disappointingly, subdued. In large part we’ve got ongoing uncertainty about Brexit to thank for that,” commented Lee Hopley, chief economist at EEF. “This domestic uncertainty is now being exacerbated by global trade tensions which could add up to potentially different dynamics over the next year. Given the different sectoral make-up of UK regional economies and their varying exposure to overseas markets, these trends will play out in different ways around the UK, leading to a return of more divergence in regional performance in the year ahead.”

“Manufacturing remains a hugely important part of the UK economy. It is a true sector powerhouse that creates jobs, wealth and growth across all UK regions,” added Tom Lawton, partner and head of BDO Manufacturing. “The government cannot afford to lose focus on the importance of UK manufacturing as we endure the twists and turns of EU negotiations. A long-term, practical industrial strategy that delivers a positive trading environment and helps tackle the productivity puzzle is crucial. Without that the sector will struggle to have the confidence to invest in skills and automation, which are so important to the future of the UK manufacturing.”