Manufacturers warned of a bumpy ride ahead

Andy Tuscher, Yorkshire and Humber Region Director at EEF, said global political upheaval means that 2017 looks set to be another bumpy ride

According to the latest annual Executive Survey from EEF, the manufacturers’ organisation, 47 per cent of manufacturers are steeling themselves for a decline while only 25 per cent expect UK economic conditions to improve.

EEF said that while manufacturers expect 2017 to be another year of risks, they are gearing up to hit its challenges head-on.

It said that while almost half of companies (46 per cent) see more risks than opportunities in the year ahead, the sector is far from apprehensive and UK manufacturing is striding into 2017 with firms focused on delivering ambitious growth plans and feeling positive about productivity, employment, investment and sales for the year ahead.

It claimed that manufacturers are realistic about the challenges ahead, but appear to be quietly confident about conditions in their industry.

“The same cannot be said of broader conditions however,” said the report.

“While a quarter of firms (25 per cent) expect UK economic conditions to improve, these are outpaced by those steeling themselves for a decline (47 per cent). The view is similar when it comes to global economic conditions too, where 24 per cent anticipate improvement and 36 per cent predict deterioration during 2017.”

However this more pessimistic outlook does not taint manufacturers’ views of their own future performance, with many still expecting to “pack a punch“.

In the year ahead, 56 per cent of firms expect to increase their productivity, while half (50 per cent) expect to boost UK sales.

There is also good news on the export front, where over four in ten firms expect to see improvements in volumes (43 per cent in non-EU and 41 per cent in EU exports). The report said that permanent employees and investment levels also look set to be stepping in the right direction this year.

Brexit looms high on manufacturers’ risk radar and it is seen as a significant exacerbating factor in a number of key areas, such as exchange rate movements (74 per cent), rising input costs (66 per cent) and volatility in major markets (45 per cent). Companies also recognise potential impacts from Brexit to the perception of UK sourcing.

But, while Brexit has amplified risks, it has not tarnished manufacturers’ views on the UK as a manufacturing base. Over six in ten firms (61 per cent) say that the UK is a competitive location for their manufacturing activities - up from 56 per cent last year. Just 13 per cent disagree, down from 18 per cent last year.

“Although much could change as Brexit negotiations progress, for the time being at least this can be seen as a vote of confidence in the UK,” the report said.

Andy Tuscher, Yorkshire and Humber Region Director at EEF, said: “Global political upheaval means that 2017 looks set to be another bumpy ride, with manufacturers forced to navigate uncertainty, unpredictable economic conditions and a number of risks that have been amplified by Brexit.

“Against this backdrop a smooth journey is far from guaranteed, but firms are strongly attuned to the challenges and remain fully focused and determined to deliver on their long-term plans for growth. With a new digitally-driven industrial era on the horizon and everything to play for, this long-term vision and focus is vital - despite the peaks and troughs manufacturers cannot afford to be diverted away from where they need to be.“

The report said that 56 per cent of manufacturers intend to increase productivity through process innovations.