How Will Brexit Impact on UK Manufacturing in 2018?

With Brexit still ever present in our news and looming ever nearer on the horizon, we’ve been very interested to follow the impact that it has had so far on manufacturing costs and the UK economy. At present, manufacturing itself only makes up 10% of the economy but that doesn’t include the number of jobs and trades that are supported by, and support, manufacturing – how will these be impacted?

To properly answer this we need to look at pre-Brexit manufacturing – we saw 2016 end on a strong note for the manufacturing and construction sectors, with data from ONS (The Office for National Statistics) showing that the UK was the fastest growing out of the G7 leading industrial countries, despite the Brexit outcome in June of that year, the Bank of England forecast that we’d see a further 2% growth in 2017. This was indeed seen, with manufacturing activity in July 2017 the second-highest level of growth in more than three years; as such, production increased with more job opportunities arising for both domestic and international demand.

Sector Slowdown

Fast forward to 2018 and we have seen a slowdown – Jan-Mar had seen growth drop to an 8-month low of just 0.4%, so whilst manufacturing output does remain above 50 on the PMI (purchasing manager’s index), this is now at it’s second-lowest reading since June 2016 and the vote to leave the EU. British goods are no longer as cheap abroad as they have been in previous years due to a stronger pound; expansion across the eurozone has also seen a slowdown, which has also impacted British firms.

Investment Increase

Despite the sector slowdown and collapse of construction giant Carillion at the start of the year, right now the outlook is positive. Lloyds Bank Commercial Banking are bringing forward plans for investment, automation in technology is happening across the sector, more opportunities have been presented by Industry 4.0. With many using specialist asset finance facilities to invest in advanced equipment, a steep rise in borrowing has become apparent (source: Bank of England lending figures Feb-18), but this maintains the trend started in April 2017.

Industry Impact

If we’re to believe all we’re told, then we should be expecting a strong continuation of the sector growth we saw last year, although perhaps not to the same level due to the stronger pound and Brexit uncertainties. The impact as such, working to this belief, would be that investment will continue to rise in manufacturing and construction, with more jobs available to both skilled workers and those on apprenticeships and “learn to earn” training schemes. It certainly is key to promote this, as we will need to create a robust manufacturing sector moving forward. But, only time will tell as to whether this will play out. Here at Hydropac, we certainly hope so!