Sunday, July 12, 2020

Uncertainty bites as majority of exporting manufacturers report drops in orders and cashflow

A majority of UK manufacturing exporters are reporting a stark worsening in sales and orders, with indicators showing a substantial drop compared to 2017 and 2018 levels.

The Quarterly International Trade Outlook for Q3 2019, released by British Chambers of Commerce and DHL today, reveals that indicators for exporting manufacturers in Q3 2019 have undergone large declines, with several key indicators for orders and cashflow now in negative territory.

The percentage balance of exporting manufacturers reporting an increase in export orders fell to –1 per cent, down from +9 in the previous quarter. The balance of those reporting increased domestic orders fell to -4 per cent in Q3, down from +8 per cent in Q2.

The balance of exporting manufacturers reporting improved cash flow stood at -5 per cent in Q3, down from +6 per cent in Q2. In Q3 2018, one year ago, the balance stood at +13.

While exporting manufacturers saw large declines across the QITO indicators, the exporting services sector also saw indicators well below historical levels. In Q3 +8 per cent of exporting service sector firms reported an increase in domestic orders, down from +12 per cent in Q2.  A balance of zero per cent reported an increase in export orders, down from +5.

BCC Director General Adam Marshall said: “A strong and balanced economy needs healthy exporters at its core. But while there are some companies bucking the trend, future sales and orders are now well into negative territory, after a steady downward trend in export performance this year.

“On top of Brexit uncertainty and global trade tensions, election turbulence won’t be helping. The next administration will need to most fast to restore confidence, with action to upgrade infrastructure, boost skills and cut business costs.

“Without urgent clarity around our future trading relationship with the EU, firms across the UK will increasingly struggle to fill order books, and jobs and prosperity in many of our communities could be at risk.”

Vice President of Marketing at DHL Express, Shannon Diett said: “This quarter’s report shows clearly that it continues to be a challenging environment for UK exporters.

“Whether expanding to new markets within the EU or elsewhere in the world, diversifying the portfolio of countries in which you operate will help stabilise your business in the coming months and provide a future engine for growth. In this regard a number of non-traditional markets present a significant opportunity for UK exporters.

“Working with logistics providers to ensure the transition to any new trade arrangement is as smooth as possible will be vital for exporters looking to mitigate the uncertainty and thrive into the future.

“Along with broadening exposure to more markets, taking simple actions like ensuring you are electronically transmitting your customs documentation or sharing your EORI number with your shipper is advisable regardless the ultimate outcome.”

67 per cent of exporting manufacturers cite exchange rates as a factor of concern to their business, up from 63 per cent in Q2. This remains the top factor of concern for exporting manufacturers.

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