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North East manufacturing set for post-Brexit recovery in Q1 2017, survey says

North East manufacturers will finally see economic recovery in their sector in the first quarter of 2017, following industry turbulence post Brexit.

According to a survey released today by EEF, the manufacturers’ organisation, and accountants and business advisory firm BDO LLP, the first three months of next year will enjoy a much improved boost to output and orders.

Publishing the Q4 Manufacturing Outlook survey and revised economic forecasts, EEF pointed to early signs that the sector has left behind the negative effects of the low oil price and concerns about global growth and is now seeing opportunities from a resilient UK market and brightening export prospects.

However, EEF stressed that the picture is one of the sector regaining ground after a sluggish eighteen months.

While key indicators moving back into the black is a positive development, risks remain on the horizon, some Brexit related and others potentially stemming from elsewhere in the world. As a result, despite the improvement in conditions, EEF is still forecasting that manufacturing will contract in 2017.

Furthermore, EEF also pointed to inflationary pressures building and significant price rises in the pipeline, a factor likely to weigh down on domestic activity in the year ahead. Profit margins are also under considerable pressure and are likely to be squeezed further in 2017.

According to the survey output in the North East in the first 3 months of 2017 will increase by a balance +25%, compared with +6% in the last three months, with a strong forecast for new orders for the next 3 months of +19%. More companies also recruited in the North East in the last three months with a balance of +13%.

Liz Mayes, EEF Region Director in the North East, said: “This is the most upbeat reading on the state of manufacturing we’ve seen for some eighteen months and signals the start of brightening conditions for manufacturing, which had been briefly knocked off course following the referendum.

“This anticipated turnaround can be attributed to a range of factors including the resilience, thus far, of the UK economy but also the strengthening of demand in a number of major markets.

“Critically, this should spur some new investment and recruitment activity to meeting fulfil new customer demands.

“While confidence is back on the up, manufacturers are still cognisant of growth challenges in the near term.

“Brexit aside, global growth is not yet on the firmest of footings and, with volatile exchange rates also in the mix, UK manufacturers will need to continue to be nimble in their responses to emerging challenges and opportunities in the months ahead.”

Jason Whitworth, Corporate Finance Partner and Head of Manufacturing at BDO LLP in the North East, added: “Despite uncertainty at home and abroad, UK manufacturing is proving to be resilient.

“Brexit means a period of challenge and vulnerability for the sector and businesses need stability and certainty in government policy if they are to continue to commit to the investment that the country needs to grow.”