According to the Q2 Manufacturing Outlook survey export orders have contracted to a balance of -9% amid signs Asian customers are shunning the UK, Tony McDonough reports

Lack of clarity over the UK’s departure from the European Union is contributing to a weakening of confidence among North West manufacturers.

And the chief economist at Make UK, the Manufacturers’ Organisation, says a no-deal Brexit would be “the height of economic lunacy” as signs that Asian customers were shunning the UK start to appear.

According to the Q2 Manufacturing Outlook survey published by Make UK and accountancy firm BDO, export orders have contracted to a balance of -9%, the worst performance of any UK region.

It also showed business confidence among manufacturers in the region has fallen for the third quarter in a row as it remains unclear whether Brexit will happen by the current deadline of October 31.

Artificial stockpiling

And while output and orders have been in positive territory in the region in the last three months, they are expected to trend down sharply in the second half of the year.

This is in response to the boost of artificial stockpiling winding down and growing evidence that European customers are switching their supply chains away from the UK. There are signs that Asian customers are balking at the unknown of what may exist as the UK leaves trade agreements which operate under EU rules.

Despite the weakening picture however, the balances for both investment and employment by North West companies remained stable in the last quarter.

As a result of this mixed picture, Make UK is now forecasting manufacturing growth of just 0.2% in 2018 and an anaemic 0.8% in 2020. GDP is forecast at 1.2% in 2019 and 1.6% in 2020.  

Weakening trend

Seamus Nevin, chief economist at Make UK, said: “Whilst the data at first glance makes for reassuring reading there is a clear weakening trend which, if it continues, would push some elements of industry into negative territory before too long.

“Earlier this year there was clear evidence that industry was on steroids as companies stockpiled. Underneath, however, there is growing evidence that global customers are moving away from the UK as concerns over Brexit and trade agreements continue.

“With this picture it would be the height of economic lunacy to take the UK out of the EU with no deal in place. This race to the bottom in the interests of party ideology has to stop otherwise there will be a heavy price to pay.”