Manufacturing optimism tempered by prospect of EU crash-out

Jon Gilpin, head of manufacturing at BDO in the Midlands (photo copyright Edward Moss)

Manufacturing in the East Midlands is on the up, but the potential impact of a no-deal Brexit should give the sector cause for concern according to one industry expert.

A new report published today by manufacturers’ organisation Make UK and BDO LLP shows that the East Midlands is the most improved region in the UK over the last twelve months in terms of its manufacturing output, which is now worth £17.2 billion.

However, according to Jon Gilpin, head of manufacturing at BDO in the Midlands, whilst the sector’s growth “gives reason to be optimistic,” the new report also demonstrates the “disproportionate” impact a no-deal Brexit could have on regions that trade heavily with the EU.

The manufacturing sector accounts for some 17 per cent of output in the East Midlands – way above the national average of 10 per cent – and 13 percent of the workforce. The region is also a strong export performer, accounting for almost 6.5 per cent of total UK manufacturing exports.

Crucially, the EU is the region’s main export destination, and Gilpin believes that a no-deal Brexit would pose significant risks for East Midlands manufacturers.

He said: “The [Make UK/BDO] survey demonstrates the disproportionate impact a no-deal Brexit could have on the UK regions where the majority of trade is within the EU. With over half of exports from the East Midlands going to these markets, there is a risk that future growth will slow significantly.

“Companies are already holding back on investment as a result of the prolonged period of Brexit instability and risk lagging behind their global competitors when it comes to the uptake of industry 4.0 processes and technology. It will be difficult for many manufacturers to regain lost ground in these areas particularly as digital transformation picks up pace.”

Despite this note of caution, Gilpin is keen to stress the positive findings of the report, and believes the East Midlands’ contribution to the overall UK economy “should not be underestimated.”

Charlotte Horobin, region director for Make UK in the Midlands, added: “The report shows that industry continues to have a central role to play in the success of the East Midlands economy. The last year has seen a strong performance, despite the uncertain political environment and global markets.

“There are well documented challenges going forward, not least those facing the automotive and construction supply chains and the global economic downturn. Furthermore, the outcome of Brexit has the potential to have an impact on the future performance of manufacturers in the East Midlands given the region’s exposure to it as a major export market.

“Despite this, those companies who invest and innovate will still have the best long term prospects and can contribute to raising the productivity performance of the region and the UK as a whole.”

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