Brexit stagnation puts manufacturing investment on hold

Investment by West Midlands manufacturers has seen a reality check in response to the continued political uncertainty caused by Brexit, a new study has concluded.

Just one third of companies believe Brexit is having no impact on their investment plans, the EEF/Santander Annual Investment Monitor has claimed.

A similar proportion is only investing to satisfy current plans while they wait for clarity on any deal before committing more.

In addition, 13% of companies are holding off investment altogether until there is further clarity on a Brexit deal.

Taken together, the research concludes this leaves the outlook for investment by manufacturers finely balanced with only a narrow majority expecting to be investing more on new equipment in the next two years.

While the reticence emanating from other parts of the global economy has diminished, the survey is said to reflect increasing Brexit-related uncertainty.

This indicates that while manufacturers may be investing to satisfy current plans or, expand capacity, they are not investing in improving their production capacity.

The survey’s spotlight on investment in automation shows that industry is making only slow progress on automating manufacturing processes, with industry being held back not just by caution but also by challenges from the cost of technology, uncertainty about returns and the capability to successfully implement change.

In response, EEF said it considered that boosting investment and productivity should be at the forefront of the Chancellor’s thoughts as he prepared his Budget statement.

Charlotte Horobin, Region Director for EEF in the West Midlands, said: “Manufacturers have navigated a panoply of demand-related challenges in recent years, which have taken a toll on the sector’s appetite and ability to invest.

“With global demand on the up conditions should be ripe for industry to make new investments in capacity and productivity enhancing technology. But Brexit means the future outlook for investment is not clear cut.”

Paul Brooks, Head of Manufacturing, Santander, said: “While the Monitor shows that investment by UK manufacturers is down on last year, it is encouraging to see that just over half of manufacturers intend to spend more over the coming two years.

“The Monitor clearly highlights the need for businesses to invest more in automation, with the report showing that the UK investing significantly less in machinery than our European counterparts. By investing more in this area, UK manufacturers can improve their competitiveness.”