In a fraught battle to stay afloat in the wake of COVID-19, manufacturers have slashed investment despite a rise in output and orders from historic lows last quarter, a major industry survey has found.
According to the Make UK/BDO Manufacturing Outlook Q3 survey, the balance on investment intentions fell to -32% from -26% in the last quarter.
Whilst not reaching the levels of cutbacks seen during the financial crisis, the trend downwards is following a similar pattern to that seen at the end of 2008 and beginning of 2009.
By way of an indicator as to how far investment has been cut back this year the balance in the first quarter was +20% as industry bathed in what seemed greater political certainty following the general election. The biggest cutbacks were in Yorkshire & Humber, Wales and Scotland.
Make UK also warned that given the uncertainty surrounding the Brexit negotiations and the very real possibility of ‘no deal’, the combination of that outcome with the continued impact of the pandemic could cause further damage to investment prospects in the latter part of the year.
“Manufacturing has begun to climb away from the abyss that it stared into earlier in the year. But, make no mistake it is going to be a long haul back towards normal trading conditions, with talk of a V shaped recovery nothing more than fanciful,” said Stephen Phipson, Chief Executive of Make UK.
“Having emerged from three years of political uncertainty at the end of last year, increasing talk of a final ‘no deal’ exit from the EU would be a final nail in the coffin for many companies.
“If we are to avoid this and, the avalanche of job losses that would follow in already hard hit areas and sectors, it is essential that the first step towards a fuller recovery is provided by a comprehensive trade agreement with the EU.”
Tom Lawton, Head of Manufacturing at BDO, added: “No-one is in any doubt about the financial challenges facing manufacturers, but turning the investment taps off now will have serious medium to long term implications.
“The Government must be alive to this risk and provide the support required to help UK manufacturers through this transition period and beyond.
“Other countries (perhaps in particular Germany) do provide good examples of consistent long term support to their manufacturing sectors. The UK should look to adopt a similar approach.”