Industry Warns of Damaging Double Whammy from ‘No Deal’
Britain’s manufacturers have warned that some of the UK’s most economically deprived regions are at risk of a double whammy hit to their economies in the event of a ‘no deal’ Brexit in new analysis published today by Make UK.
The annual Make UK/BDO Regional Manufacturing Outlook highlights manufacturers’ contribution to economic regions of the UK in terms of output, jobs and investment. It also highlights the exposure of those regions with a high dependence on exports to the EU are already suffering losses, but are alsolikely to be most at risk from a ‘no deal’ Brexit, barriers to trade and tariffs.
According to the analysis Wales (almost two thirds), the North East and Yorkshire & Humber (both 60%) have a very high exposure to trade with the EU. Combined the critical contribution of manufacturing to the economy overall in Wales and the North East is way above average (17.5% and 15.2% respectively), the risks of ‘no deal’ are likely to be felt disproportionately by these areas in particular. The East Midlands is also not too dissimilar with manufacturing accounting for almost a fifth of its economy and the EU being its biggest market accounting for just over half its exports.
Given Wales and the North East both contain some of the most economically disadvantaged areas of the UK, a hard Brexit is likely to prove especially damaging for these areas in particular.
For the first time the analysis also shows a clear correlation between regional performance and exposure to industry sectors and global trends and structural change.
London and the South East was the best performing region in the last year and is now an emerging industrial powerhouse being the second largest manufacturing region worth £28.1bn annually. With its high exposure to the electronics sector it is benefitting from the increasing global trend towards investment in 4IR related technologies such as robotics and artificial intelligence.
Other star performers were the North West which remains the biggest region in terms of output (£28.5bn), as well as the most productive with high value sectors such as automotive, aerospace and pharmaceuticals. The East Midlands was the most improved region over the last year in terms of output, with a high exposure to the food and drink sector which is not just the biggest manufacturing sector, but was also the second most improved sector in terms of increased exports.
By contrast the ongoing difficulties in the automotive sector are having an ominous impact on manufacturing and those regions most closely linked to it. This impact is being seen in worrying declines in output, orders and collapsing investment levels. This has notably impacted on the West Midlands and the North East which have reported weak future investment and recruitment plans.
Furthermore, the analysis also shows the clear impact on the metals sector from the ongoing trade war between the US and China while the mechanical equipment sector continued to suffer from the downturn in capital investment across the globe which has taken place since the stellar year of 2017 when it was the best performing sector in the UK.
The report also shines a light on manufacturing productivity with huge variations across the country. The North West is the most productive region in the UK (114.5% of the national average) with Scotland and London and the South East also strong performers. By contrast the East Midlands is the least productive region (84.7% of the national average) with Yorkshire & Humber and the North East close to the bottom of the rankings. This differing performance in productivity should be a major focus of a renewed push on the Government’s Industrial strategy, especially local industrial partnerships.
Commenting, Stephen Phipson, Chief Executive at Make UK, said:
“Although Brexit stockpiling put manufacturing on steroids for a little while, the industry has since gone almost cold turkey and the overall picture over the last year now shows Brexit, global trade wars and the economic downturn in major markets are menacing UK manufacturers.
“In particular, there are some regions of the UK with a very high exposure to trade with the EU and who are likely to suffer a disproportionate double whammy to their economies and jobs from a damaging ‘no deal’ exit.
“Policymakers need to be on high alert to deal with the fallout from this to ensure manufacturers do not suffer collateral impact as a result. This underlines why we strongly support calls for the Government to agree a deal with the EU which protects and supports British manufacturers.”
To view this article on the MAKE UK website, where you can download the report in full, click here.
