Mixed picture for Yorkshire’s manufacturers as EU trading remains a ‘major cloud’

Manufacturers in Yorkshire & The Humber are seeing a mixed picture in the first quarter of the year, according to a major survey published today by Make UK and business advisory firm BDO.

Manufacturers have upgraded their growth forecasts for this year despite a fall in export orders. Picture: Rui Vieira/PA Wire
Manufacturers have upgraded their growth forecasts for this year despite a fall in export orders. Picture: Rui Vieira/PA Wire

The survey also shows the brutal impact of the pandemic with the sector overall seeing a drop in output of 10 per cent nationally last year. However, given the more positive picture as the year progresses, Make UK has upgraded its growth forecasts for manufacturing for 2021.

According to the survey, output in the region improved from the end of last year to near average historic levels.

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UK orders are especially strong, reflecting the exposure of the region to the Food and Drink sector which, despite restrictions on hospitality, has performed strongly in the last year.

Export orders are flat, however, reflecting the national picture as companies struggle to adapt to the increased bureaucracy and costs of exporting to the EU.

Reflecting the continuing difficult business conditions, recruitment intentions have also remained negative as have investment intentions which, are below the national picture for both indicators.

In response to the improving business conditions through the year, Make UK has upgraded its forecasts for manufacturing growth this year to 3.9 per cent, up from 2.7 per cent at the end of 2020.

June Smith, region director for Make UK in the North, said: “After the seismic shock to the sector last year, manufacturers in Yorkshire & The Humber are seeing a slow road to recovery, especially given the major structural issues affecting the automotive sector and its supply chain.

“The major cloud on the horizon, however, remains the transition to new trading arrangements with the EU which go beyond ‘teething troubles’.

“Government must recognise this and work with Industry and the EU to smooth these problems out, or the problems we are seeing now will become structural and permanent.

“This will have long-term consequences for exporters who will lose business and importers who will choose to give up on the UK market altogether.”

Steve Talbot, head of manufacturing at BDO in Yorkshire and the Humber, said: “With Yorkshire-based manufacturers reporting below average investment intentions, the Chancellor’s recently announced super-deduction tax incentive presents a real opportunity for those firms with access to finance to bring forward investment plans into the qualifying period and boost their productivity.

“However, the proposed two year window is arguably too short. What the region’s manufacturers really need is certainty over the longer term to allow the sector to confidently invest over a 10-15 year horizon.

“While the results of this quarter’s survey are in some ways encouraging, the next 6-9 months will nevertheless be critical for those manufacturers facing financial distress. Many will have deferred tax payments and taken on additional loans to help them through the crisis. The recently announced extension of the furlough scheme and other support measures will help in the short term, however, many will need to use this time to plan and implement turnaround strategies - and in certain cases take some tough decisions.” Support The Yorkshire Post and become a subscriber today.

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James Mitchinson