East Midlands manufacturers least confident in UK
A new report out today from EEF, the manufacturing organisation and BDO, the accountancy and business advisory firm, shows that East Midlands manufacturers are the least confident in the UK.
The report says that whilst the sector in the region has shaken off some of its challenges over the last year, with the number of firms growing and output climbing back above the UK average, last month’s Brexit vote has hit manufacturers’ business confidence hard. As a result, the region has been left trailing behind the rest of the UK, coming in last in the confidence stakes.
The annual report – Regional Manufacturing Outlook – draws upon survey data and the latest ONS figures to provide a longer-term picture of the health of UK manufacturing. It shows that the East Midlands now boasts almost 11,700 manufacturing firms – up 2.1% year-on-year. Manufacturing now accounts for 18.1% of the East Midlands’ total output – the highest proportion out of all UK regions – with food and drink, transport equipment and rubber and plastics the key sectors.
Despite the number of manufacturing jobs in the region falling by 1.5% between 2010 and 2016, 269,000 people are now employed by manufacturers across the region – 11.5% of the region’s total workforce and the joint highest level in the UK.
The region also continues to enjoy a strong export record. It accounts for 7.9% of the UK’s manufactured exports – the 5th biggest contribution by a single region. 45% of the region’s exports are destined for the EU, which is slightly below the national average.
But despite these positives, manufacturers in the region are not immune to post-referendum jitters. Just prior to the vote for Brexit, the region scored 6.1 out of a possible ten points for confidence – since the vote this score has dropped to five out of ten. The report shows that the East Midlands has slipped down the UK rankings for business confidence from 7th place last year to 9th place, the bottom, today.
Before the referendum result was known, local manufacturers were optimistic about this quarter (Q3 2016). They expected output to grow and reported healthy investment intentions for the next 12 months. They also anticipated recruitment to pick up after reporting falls in the first half of the year.
Following the vote, 19% of local manufacturers intend to immediately review recruitment and 16% UK investment – higher than in most other regions. Local manufacturers are more concerned about exchange rate volatility (84%) and increased costs (66%) than their peers in other regions, with fluctuations in the price of raw materials key for the competitiveness of the highly commoditised food and drink and rubber and plastics sectors.
Similar to the rest of the UK, most of the region’s manufacturers have reported no immediate change in demand. They are generally pessimistic about their prospects for future demand, but less so about export orders from the EU. Indeed, in this region the current weakness in Sterling is seen as the main opportunity to come out from the referendum.
Whether opportunity ultimately outweighs risk remains to be seen. But, in these unprecedented times, next year’s confidence rankings could end up looking very different again.
Richard Halstead, Midlands and East Region director at EEF, said: “Despite some challenging times, manufacturing in our region remains a force to be reckoned with. This last year shows firms getting back into their stride. But the referendum outcome provided a jolt and it’s clear that we’re now on a new path with fresh challenges ahead.
“Exchange rate volatility, political uncertainty and the danger of increased costs are already causing concern in the region and business confidence is in short supply. But our sector is nothing if not dynamic, determined and resilient. With a solid business environment, supportive policies and the right outcome from Brexit negotiations, manufacturers in this region should be able to overcome the risks, reap future growth rewards and get their business confidence back on track.”
Manufacturers’ business confidence rankings by region:
| Region | 2016
Post-Brexit vote Ranking |
2015 ranking | Confidence score 2016 Q2 pre-referendum | Confidence score post-referendum | Change in confidence score |
| South East and London | 1 | (6) | 7.3 | 5.7 | -1.6 |
| Yorks & Humber | 2 | (2) | 6.4 | 5.4 | -1.0 |
| North East | 3 | (9) | 5.8 | 5.3 | -0.5 |
| South West | 4 | (4) | 6.2 | 5.2 | -1.0 |
| West Midlands | 5 | (1) | 6.6 | 5.2 | -1.3* |
| Wales | 6 | (8) | 6.5 | 5.1 | -1.4 |
| Eastern | 7 | (3) | 6.2 | 5.1 | -1.1 |
| North West | 8 | (5) | 6.3 | 5.0 | -1.2* |
| East Midlands | 9 | (7) | 6.1 | 5.0 | -1.1 |
| UK average | 6.37 | 5.24 | -1.13 |
Source: EEF, the manufacturers’ organisation, and BDO LLP. Confidence scores are out of a possible ten points.
*Difference due to rounding.
