The survey of over 200 British manufacturers – two-thirds of them exporters – found that business confidence, based on the outlook for sales, orders and profits, has fallen from 30 per cent in January to 24 per cent. Despite the decline, the sector’s confidence remains broadly in line with the UK average of 25 per cent.
The dip in confidence may be the result of concerns about the economy, with two-thirds (68 per cent) of firms saying they expect the UK to enter recession within the next 12 months.
Meanwhile, manufacturers – which between them account for almost half of UK exports – are also worried about tension between the US and China. More than half (53 per cent) said they were concerned about an all-out trade war between the world’s two largest economies.
The sector has reported a slow-down in recruitment with a net balance of 5 per cent of firms planning to increase staff numbers in the next six months, down from 13 per cent in January. More than half (55 per cent) of manufacturers reported difficultly in hiring skilled staff, up from 50 per cent at the start of the year.
Investment intentions have also slowed. A net balance of 8 per cent of firms said they plan to increase investment over the next six months, down from 15 per cent in January.
Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking (pictured), said: “The UK manufacturing sector is truly global so it’s no surprise that the prospect of a trade war between the US and China is on the minds of many. This is a reminder that exporters must closely monitor geopolitical tensions.
“Nevertheless, the sector’s outlook remains broadly in line with the wider UK economy. Firms are creating new jobs and are planning to invest, albeit at a reduced rate compared with what we saw at the start of the year.”
Manufacturers reported that Brexit uncertainty – cited by a quarter of firms (26 per cent) – remains the biggest challenge they face. Four in ten (41 per cent) said that a no-deal scenario with the EU would have a negative impact on their business compared to 24 per cent who said it would be positive.
While the value of sterling has bounced back since its decline following the EU referendum in June 2016, two-thirds of manufacturers (66 per cent) said they had worries about the potential effect of currency movements over the next six months.
Dave Atkinson added: “There are headwinds for the sector, particularly around international markets, but as always manufacturers are approaching these challenges with resilience. We’re hearing anecdotal evidence of firms starting to reshore supply chains in response to uncertainty about the future relationship with the EU and businesses are building strong customer networks that continue to bolster their order books.”
The Business in Britain report, now in its 26th year, gathers the views of over 1,500 UK companies, predominantly small- to medium-sized businesses, and tracks a range of performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.
