There are signs that North West manufacturers are starting to recover after the shock of the COVID-19 pandemic but a new survey shows trade with the EU is proving difficult. Tony McDonough reports
North West manufacturers are cautiously optimistic about prospects for the rest of 2021 but a new survey shows the new EU trade agreement hitting new export orders.
The latest Make UK/BDO study shows a mixed picture in the first quarter of the year as the continued struggles of the automotive and aerospace sectors has an impact across the region.
It also shows the brutal impact of the pandemic with the sector overall seeing a drop in output of 10% nationally last year. However, given the more positive picture as the year progresses, Make UK has upgraded its growth forecasts for the sector for 2021.
According to the survey, output in the North West improved from the end of last year but remains marginally negative at a balance of -5%. In line with the national picture, there is a clear divergence between UK orders which are positive and almost back to long term historic averages while export orders are negative.
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This reflects the national picture in response to exporters struggling with the increased bureaucracy and costs of dealing with new EU trading rules. Reflecting the continuing difficult business conditions, recruitment intentions have also remained negative as have investment intentions.
By contrast, however, business confidence among North West manufacturers remains high suggesting that they are expecting more positive growth through the year. In response to the improving business conditions through the year, Make UK has upgraded its forecasts for manufacturing growth this year to 3.9%, up from 2.7% at the end of 2020.
June Smith, region director for Make UK in the North, said: “After the seismic shock to the sector last year, manufacturers in the North West are seeing a slow road to recovery, especially given the major structural issues affecting the automotive sector and its supply chain.
“The major cloud on the horizon, however, remains the transition to new trading arrangements with the EU which go beyond ‘teething troubles’. Government must recognise this and work with Industry and the EU to smooth these problems out, or the problems we are seeing now will become structural and permanent.
“This will have long-term consequences for exporters who will lose business and importers who will choose to give up on the UK market altogether.”
Graham Ellis, head of manufacturing at BDO in the North West, added: “With investment intentions among North West manufacturers remaining in negative territory, the Chancellor’s recently announced super-deduction tax incentive presents a real opportunity for firms with access to finance to bring forward investment plans into the qualifying period and boost their productivity.
“However, the proposed two year window is arguably too short. What the region’s manufacturers really need is certainty over the longer term to allow the sector to confidently invest over a 10-15 year horizon.”