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Brexit worries stifling manufacturers' international growth ambitions

03 August 2018

Concerns over Brexit is stifling UK SME manufacturers' export growth as the sector focuses on stabilising its current position, according to new figures.

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The latest national Manufacturing Barometer reveals manufacturers' fears over ongoing Brexit uncertainty, highlighting that their attention must be on consolidation, especially as they also anticipate an overall slowdown in increased sales coupled with a struggle to recruit more staff in the short term.

On a brighter note, research found that UK manufacturers are much more optimistic about their international prospects post-Brexit, on average predicting double digit growth in export sales by 2020.

Almost 300 of the sector's senior decision makers were asked about their aspirations, plans and fears, as well as their overall business performance in the last six months.

Manufacturers who already send their goods overseas (70 percent of respondents) reported an anticipated average increase in turnover of just 2.1 percent generated by exports over the coming year (2018/19).

However, the same group are predicting their exports will increase by 12 percent between now and the summer of 2020.

These are the headline findings of the latest National Manufacturing Barometer, the UK's largest and widest-ranging survey of the SME manufacturing sector, conducted by SWMAS (part of the Exelin Group) in partnership with Economic Growth Solutions Ltd.

"The picture emerging from our research is of a sector focused on consolidating what they already have, for at least the next 12 months when we will finally know what a post-Brexit UK will look like," said Simon Howes, CEO of Exelin Group.

He continued: "Whilst manufacturers' cautiousness about export growth amidst the current chaos is no shock, it is encouraging to see their ambitions for 2020.

"Not only does this reflect the sector's vision, it also shows that for a large and influential part of our economy there are many optimistic signs of life after Brexit."

Respondents who don't currently trade overseas but have plans to start (10 percent) were even more bullish about their prospects, predicting a 17 percent export boost to their turnover for 2018/19 and 32 percent between now and 2019/20.

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The Barometer also asked SME manufacturers to reflect on the last six months of trading.

According to respondents, whilst reporting profits largely in line with the same period a year earlier, it appears that this is at the expense of staff recruitment numbers and investment in new equipment.

Whilst 54 percent reported an increase in sales, investments in new machinery and premises dropped to 41 percent, compared to the previous quarter's 48 percent.

Turning to recruitment, 41 percent of manufacturers increased headcount, but this was partly offset by the 20 percent who reported a reduction in staff numbers, sending overall recruitment numbers back to levels not seen since 2016/17.

This trend looks set to continue, with the number of manufacturers looking to recruit between now and the end of the year dropping to 46 percent, down from last quarter's 53 percent.

There are positive signs too, with exactly half of manufacturers expressing their desire to invest in new machinery and premises over the coming months in order to boost productivity and profitability.

"Brexit is clearly foremost in manufacturers' minds," said Dean Barnes, Regional Director of Economic Growth Solutions.

"Many SME manufacturing firms are adopting a strategy of consolidating and maximising their current opportunities, whilst making the most of this uncertain time to invest in capital equipment, staff development and new products, ready to take on the challenge – and opportunities – once the UK finally leaves the EU."

Simon Howes continued: "Our Manufacturing Barometer highlights a medium-term view of growth centred around a difficult ride for the next year as we navigate the choppy waters of Brexit.

"Manufacturers are looking towards a period of stabilising and consolidation and, beyond that, will be looking to kick-start their growth, particularly in exports, once we finally leave the EU."

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