The EEF/BDO Manufacturing Outlook Survey for the third quarter has found that the prospect of a return to stronger growth in the industry will now most likely be delayed until the end of the year. Activity levels remain unchanged from Q2, despite the recent news showing strong PMI data for August.
Overseas exports paint a more positive picture thanks to the fall in value of the Sterling post-Brexit. Demand from the EU, US and emerging markets has led to a 2% rise in export orders, the highest since Q2 2014. However, the depreciation in Sterling has also led to increased pressure on profits as prices are set to increase in the next quarter – UK and export margins fell to -22% and -21% respectively.
The EEF have warned that the government must act quickly to develop an industrial strategy and improve confidence to make the UK an attractive proposition for future manufacturing investment.
Lee Hopley, chief economist at EEF (pictured), said: “Manufacturers’ confidence collapsed in the aftermath of the referendum, but our latest survey provides some relief that this has corrected. Signs of an export revival are helping to drive more optimism about activity in the second half of the year, but concerns about whether the UK economy can shrug off post-referendum challenges is clearly evident.
“These risks are expected to hit some sectors such as with industries linked to investment goods and construction harder than others. Despite the short-term outlook for manufacturing remaining broadly stable, the continued downward slide in investment plans should keep policy makers alive to the potential risks facing the sector.”
