Region’s manufacturers face tough second half under cloud of Brexit uncertainty

West Midlands manufacturers are seeing “far more difficult” trading conditions as they enter the Autumn as a survey shows the impact of the uncertainty of Brexit dragging on.

According to the Q3 Manufacturing Outlook survey published by Make UK, The Manufacturers’ Organisation and business advisory firm BDO, total orders have remained strong at +17%, the healthiest region of the UK.

Output has been more volatile this quarter however, reflecting the exposure of the region to the automotive sector which has endured a difficult year.

This would fit with the national picture of output continuing to decline from the first half of the year which was boosted by artificial stockpiling reaching record levels.

Export orders also fell in the West Midlands despite a cheaper pound as overseas customers move away from British goods and the global slowdown and trade wars take effect.

The more difficult picture is reflected in a number of other indicators.

Confidence among West Midlands manufacturers has fallen though remained above many other UK regions, whilst intentions to invest have contracted sharply. Recruitment, whilst also falling is still positive and above many other UK regions where it has contracted.

As a result of this mixed picture, Make UK is now forecasting manufacturing growth of just 0.1% in 2019 and an anaemic 0.6% in 2020. GDP is forecast at 1.2% in 2019 and 1.6% in 2020.  GDP is forecast to be1.1% in 2019 and 1.4% in 2020.

Charlotte Horobin, region director for Make UK in the West Midlands, said: “Industry is facing a perfect storm of factors, compounded by a hard Brexit which could not be coming at a worse possible time. In normal circumstances a global slowdown on its own would be enough, but add trade wars and the biggest shock to our economy since the War and there seems little doubt that, barring a remarkable turnaround, the sector is heading for recession.”

Jon Gilpin, head of manufacturing at BDO in the Midlands, said: “Global competition, skills shortages, lack of a coherent industrial strategy from government and continuing technological disruption has made UK manufacturing a challenging sector for decades. The long shadow cast by the possibilities of a no deal Brexit and the uncertainty of recent months has only added to the difficulties for manufacturers in the West Midlands.

“A cliff-edge decision on a deal or no-deal Brexit will mean a double whammy of continuing weaker demand for products and fundamental disruption to supply chains. The impact on supply chains will be particularly felt in the UK automotive sector where car parts are sourced from different European countries and delivered on a just in time basis before being finally assembled in the UK.

“Already suffering from a fall in output for 14 successive months, car assembly – the jewel in the crown of UK manufacturing – would be particularly hit hard by a no-deal Brexit. The Government must strain every sinew to reach a Brexit deal that protects UK manufacturing.”

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