Outlook remains positive for North West manufacturers despite increase in uncertainty

EEF, the manufacturers’ organisation

The performance of North West manufacturers has remained healthy in the final months of the year despite a cocktail of factors related to Brexit uncertainty, weaker global growth and the impact of protectionist policies according to a major survey published by EEF the manufacturers’ organisation and business advisory firm BDO LLP.

According to the Q4 EEF/BDO Manufacturing Outlook survey, output fell slightly to a balance of +25% though above the long-term average, whilst domestic orders also fell slightly to a balance of +22%, though still above the average for other UK regions. Export orders, which have been a big driver for manufacturing in recent years also fell slightly to +22% though this was from a record high in the third quarter.

This weaker picture is reflected in weaker recruitment while investment intentions fell to a balance of zero after five quarters of expansion.

Whilst EEF has revised upward its growth forecast for manufacturing for 2018 from 0.9% to 1.1% as a result of the weaker outlook and uncertainty it has downgraded its forecast for 2019 to just 0.3% from 0.5%. GDP forecasts remain unchanged for 2018 and 2019, both at 1.3%.

Commenting, Richard Halstead Director of Member Engagement for EEF in the North, said: “The moderation in manufacturing performance over the course of this year was not unexpected but in the final quarter there are more clouds on the horizon than there have been for some time.

“This should come as no surprise given the significant political uncertainty at home which is why it is essential that there is an agreement for the UK’s withdrawal from the EU as soon as possible. If everything that can go right does then business and consumer confidence should hopefully gather some steam next year with improved prospects for growth. That’s the backdrop we’re working to, let’s hope it’s the right one.”

Graham Ellis, head of manufacturing at BDO in the North West, added: “North West manufacturers have remained reasonably confident over the course of the year but the decline across all key indicators is cause for concern.

“Export orders have dropped sharply UK-wide and, although the North West’s fall isn’t as stark, there are likely to be a number of causes for the downward trend; uncertainty over our future relationship with the EU being the main one.

“Overseas demand has helped sustain manufacturing growth over the last few years and the EU remains the most important trading block for North West manufacturers. It is crucial we are seen to be open for business with the EU and other key global markets. The result of the ‘meaningful vote’ next week will dictate the government’s next steps and hopefully provide some much needed certainty as we enter the new year.”