Member Article

Fall in Sterling boosts North East exports but manufacturing outlook remains mixed

Manufacturing in the region has reflected the mixed national outlook as output remained static in the last three months, according to a survey of the sector by manufacturer’s organisation EEF and business advisers BDO LLP.

However, the fall in the value of Sterling as a result of June’s referendum has sent export levels surging to their highest levels since the second quarter of 2014 with export orders moving into positive territory in the third quarter to +2%.

According to the survey, +40% of the region’s manufacturing firms who were surveyed hope to increase output in the next three months in a sign that some confidence is returning to the sector after the initial Brexit shock which sent confidence plummeting.

That said, a majority of companies still had no plans to hire new employees while investment plans remain on the backburner, presumably while manufacturing firms look to ride out the uncertainty and get a clearer picture of the UK’s long-term economic prospects.

Liz Mayes, North East Region Director at EEF, said that, while the boost in exports and the slight rebound in confidence are reasons to be positive, there was still a great amount of uncertainty swirling through the industry.

She commented: “Manufacturers’ confidence collapsed in the aftermath of the referendum, but our latest survey provides some relief that this has corrected.

“Signs of an export revival are helping to drive more optimism about activity in the second half of the year, but concerns about whether the UK economy can shrug off post-referendum challenges are still clearly evident.

“These risks are expected to hit some sectors, such as industries linked to investment goods and construction, harder than others.

“Despite the short-term outlook for manufacturing remaining broadly stable, the continued downward slide in investment plans should keep policy makers alive to the potential risks facing the sector.”

The EEF revised its growth forecasts back in June in the wake of the EU referendum down to 1.7% in 2015 and 0.8% for 2016.

However, the modest rebound in confidence has meant the group has actually revised up its manufacturing output projections to 0.4% this year and -1.1% in 2017, but clearly more still needs to be done.

“The Government needs to proceed quickly in developing an ambitious industrial strategy to make the UK an attractive proposition for future manufacturing investment. This will become even more critical once negotiations to leave the EU begin and Article 50 is triggered,” added Liz.