European manufacturers turning backs on East Midlands supply chain, says report

Overseas manufacturers are turning their backs on East Midlands supply chains because of the uncertainty caused by Brexit, according to a new study.

However, the region’s manfacturers continue to be resilient, says the report.

According to the Q2 Manufacturing Outlook survey published by Make UK, The Manufacturers’ Organisation and business advisory firm BDO, both output and total orders were positive for regional manufacturers in the last quarter.

This fits with the national picture of output being boosted by artificial stockpiling which reached record levels.

Export orders were also positive but are forecast to contract in the second half of the year amid growing evidence that European customers are switching their supply chains away from the UK. In addition 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.

The mixed picture is reflected in a number of other indicators. Intentions to both recruit and invest were positive in the last quarter (investment intentions being the highest of any UK region) though recruitment is expected to trend down in the second half of the year. In addition, business confidence remains positive in the East Midlands, the highest level of any UK region.

Make UK is 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.

Charlotte Horobin, region director at Make UK in the East Midlands, 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.”

Jon Gilpin, head of manufacturing at BDO in the Midlands, said: “East Midlands manufacturers seem to be bucking the national trend with business confidence, output and orders all in positive territory. However, there are signs of turbulence ahead.

“Manufacturers in the region need to prepare for a more digitally-fluent future, both in terms of the technologies they deploy and the people they employ. The predicted drop in recruitment for the second half of the year may indicate that companies are not overly confident of a future worth investing in right now.”

Close