UK manufacturing slowdown eases but Brexit concerns persist

UK manufacturing slowdown eases

Questions of whether or not we leave the European Union and how we leave are still some of the most unanswered, but despite what happens, the impact of the uncertainty around Brexit is still affecting UK businesses.

The manufacturing sector is a major contributor to the UK economy, with over 2.6 million people employed within the sector, the UK is currently the ninth largest manufacturing nation in the world (The Manufacturer).

After a season of downturn within the sector easing slightly in August, factories are still fearful of the global economic slowdown and Brexit uncertainty, according to a new survey.

The Confederation of British Industry (CBI) reported an improvement in output in August compared with the previous month in its latest monthly industrial trends survey but figures remain “below normal”.

Orders in August improved, as the CBI’s order book balance rose to -13 from -34 in July, beating analyst expectations.

Around 15% of manufacturers said their order books were above normal, but 28% said their output was below normal.

Both export and domestic orders were significantly below normal levels, while the CBI’s gauge of expected selling prices fell to the lowest level in more than three years.

Bank notes and coins (Dominic Lipinski/PA)

Anna Leach, CBI deputy chief economist, said: “Despite signs of stabilisation in the data this month, UK manufacturers remain on the receiving end of a double whammy, the slowdown in the global economy and Brexit uncertainty.

“Trade tensions between nations such as China and the US only exacerbate the demand uncertainty facing UK manufacturers.”

Manufacturing firms said they expect output for the next three months to be broadly unchanged.

Official UK manufacturing data for the second quarter of 2019, showed that manufacturing output fell at the fastest pace in a decade, as the UK economy contracted for the first time in almost seven years.

Tom Crotty, group director of Ineos and chair of the CBI Manufacturing Council, said: “Relentless Brexit uncertainty has continued to be a millstone around the neck of manufacturing firms as we approach the end of the summer.

“It’s vital that the Government lifts this burden by ending the Brexit deadlock. Only then can our manufacturers turn their full attention to long-standing issues affecting the sector, such as solving the skills challenge and improving productivity.”

As much as the impact of Brexit cannot be fully understood, it is unlikely that government incentives such as R&D tax credits and Patent Box will change. These incentives are fundamental to any innovating business, with the ability to release cash which could be used to address many business challenges and prepare for the future.

The UK government may be unclear in relation to Brexit, but they haven’t wavered in their support and drive for UK innovation. If you are unsure if you qualify for any of these schemes please get in touch and speak to one of our technical experts.