Latest survey from Make UK and BDO shows signs of optimism of recovery from the COVID-19 crisis among manufacturers but warns of dire consequences of a no-deal Brexit. Tony McDonough reports
Manufacturers in the North West are braced for a “brutal” 12% fall in output in 2020 due to the impact of the COVID-19 pandemic – a new study reveals.
And the latest survey published by manufacturers’ organisation Make UK and accountancy firm BDO also warns that a no-deal Brexit could land a “knockout blow” to the sector.
However, it also showed a degree of optimism among firms who see a brighter outlook for 2021, with a COVID vaccine now having arrived in the UK. It is hoped this will allow the country to begin to open up again in the first half of 2021.
It says a “bumpy road” also lies ahead with a darkening outlook for exports ahead of the final departure of the UK from the EU. The automotive sector, in particular, especially fearful of the potential impact of any tariffs from a no-deal Brexit.
According to the survey output declined slightly, reflecting the continued difficulties affecting aerospace and automotive. But total orders improved significantly, in particular domestic orders which registered a positive balance of +22%, substantially better than the national picture.
In addition, export orders also improved significantly by the most of any UK region. As a result of this, both the pictures for recruitment intentions and investment improved in the North West and ahead of the national average.
June Smith, region director for Make UK in the North, said: “Manufacturing has stepped back from the abyss that it stared into earlier in the year. But, make no mistake it is going to be a long haul back, with talk of a V shaped recovery nothing more than fanciful.
“However, having endured over four years of political uncertainty, combined with the pandemic many in industry are feeling like an exhausted boxer in the final round of a bout, with a ‘no deal’ exit from the EU potentially landing a knockout blow.
“Should this happen the nascent recovery is likely to go into reverse, with significant damage to manufacturing and job losses following in already hard hit areas and sectors.
“It is essential that the first step towards a fuller recovery is provided by a comprehensive tariff and, quota free, trade agreement with the EU with a sensible range of easements to allow business some time to adapt.”
Graham Ellis, Head of Manufacturing at BDO in the North West, added: “After a torrid year, manufacturers in the North West who rely on Continental supply chains and export markets now face a race against the clock to prepare for the end of the transition period. The prolonged negotiations with the EU have made this far more difficult than it should have been.
“Manufacturers are now desperate for greater clarity so that they can be released from the post-referendum paralysis which has made it nigh-on impossible to take long term decisions.”
In response to the continued impact of the pandemic on the sector and the fact recovery is likely to now be more drawn out, Make UK has substantially downgraded its forecasts for manufacturing growth to just 2.7% in 2021, down from 5.1%. GDP is forecast to contract by 11.3% in 2020 and grow 5.4% in 2021.