Brexit leads to manufacturer’s confidence dropping

Despite the drop, the South East and London area is still the top of confidence ratings, with the North West and East Midlands manufacturers at the bottom of the pile for optimism.

The report out today from EEF, the manufacturers’ organisation, and BDO LLP, the accountancy and business advisory firm, shows that manufacturers’ business confidence has taken an across the board beating following last month’s vote for Brexit. Every region in England and Wales has suffered a decline in optimism with the biggest falls seen by manufacturers in the South East & London and Wales, and the smallest by firms in the North East.  

Despite suffering the largest fall, the South East & London still ranks top in the UK for business confidence, scoring 5.7 out of a possible ten points, while Yorkshire & Humber comes in second place (5.4 out of ten). At the opposite end of the table are the North West and the East Midlands, bringing up the rear with a score of five out of ten.

In the North West, confidence may be suffering in part because a quarter of companies (25%) are unable to yet identify any business opportunities from Brexit, higher than any other region. More companies here too are concerned about weaker demand prospects (59%) and the attitude of their parent company following the referendum (28%) than elsewhere in the UK.

In the East Midlands, 19% of manufacturers said they would immediately review UK recruitment, UK investment (16%), overseas investment (11%) and the country location of their operations (10%) - higher than in most other regions. Local manufacturers are also more concerned about exchange rate volatility (84%) and increased costs (66%) than those in other regions.

In contrast, manufacturers in Yorkshire and Humber see a handful of opportunities following the Brexit vote. They top the table for optimism about increased demand (25%), long-term certainty about the UK/EU relationship (21%) and lower regulatory burden (25%). And, despite seeing the steepest decline, manufacturers in the South East & London are on the whole more sanguine about the outcome of the vote than the majority of their peers, with 51% seeing the depreciation of Sterling as of benefit.

Ms Lee Hopley, Chief Economist at EEF, said the Brexit vote has put the manufacturing sector’s recovery in jeopardy. “The growth path is now uncertain in all regions and, while firms in the South East & London and Wales look better placed to ride the storm, companies in the Eastern counties, North East and the South West appear more downbeat about their ability to cope.”

“The referendum outcome has provided a jolt and it’s clear that there are fresh challenges ahead. Exchange rate volatility, political uncertainty and the danger of increased costs are already causing concern across the regions and business confidence is in short supply.” Hopley also added the sector is nothing if not dynamic, determined and resilient. UK manufacturing remains a force to be reckoned with.

Hopley concluded: “With a solid business environment, supportive policies and the right outcome from Brexit negotiations allowing for trade and on-going access to skilled workers, manufacturers should be able to overcome the risks, reap future growth rewards and get their business confidence back on track.”

Tom Lawton, Partner and Head, BDO Manufacturing, said: “Following the Brexit vote last month, business confidence and optimism amongst UK manufacturers has dropped from an average score of 6.37 to 5.24 (out of ten).” He added that the impact on confidence was expected, but should not detract from the fact that UK manufacturing performance over the last 12 months has been strong with six (out of ten) regions seeing an increase in output.

 Lawton stated: “I firmly believe that UK manufacturers have the skills and adaptability to deal with the challenges ahead and I am confident they will make the most of the opportunities that arise.”