Yorkshire manufacturers slash investment amid pandemic worries

According to the Make UK/BDO Manufacturing Outlook Q3 survey the balance on investment intentions fell to minus 50 per cent in the last quarter, the worst balance of any UK region.

Whilst not reaching the levels of cutbacks seen during the financial crisis as yet, the trend downwards is following a similar pattern to that seen at the time.

Make UK warned that given the uncertainty surrounding the Brexit negotiations and the very real possibility of no deal, the combination of that outcome with the continued impact of the pandemic could cause further damage to investment prospects in the latter part of the year.

The impact of Covid 19 is also taking a heavy toll on company order books and output in Yorkshire & Humber. Balances for orders and output were minus 39 per cent and minus 35 per cent respectively.

Whilst this is an improvement on the picture in the last quarter, the figures remain significantly below historical averages.

Prospects for recruitment have also been dealt a heavy blow with the proportion of companies intending to recruit below the average across the UK.

Looking forward, Make UK is now forecasting that manufacturing output will fall by almost 11 per cent this year and it has downgraded its forecast for recovery in 2021 by more than a full percentage point from 6.2 per cent to 5.1 per cent. GDP is forecast to fall by 8.5 per cent this year before recovering by 10 per cent in 2021.

June Smith, region director for Make UK in the North, said: “Manufacturing has begun to climb away from the abyss that it stared into earlier in the year. But, make no mistake it is going to be a long haul back towards normal trading conditions, with talk of a V shaped recovery nothing more than fanciful.

“Having emerged from three years of political uncertainty at the end of last year, increasing talk of a final ‘no deal’ exit from the EU would be a final nail in the coffin for many companies.

"If we are to avoid this, and the avalanche of job losses that would follow in already hard hit areas and sectors, it is essential that the first step towards a fuller recovery is provided by a comprehensive trade agreement with the EU.”

Steve Talbot, head of manufacturing at BDO in Yorkshire and the Humber, added: "While the manufacturing industry has managed to claw back some lost ground from a dismal Q2, the continued collapse in investment intentions across the region is a real cause for concern.

"With a no deal exit from the EU - and associated logistics, customs and cost implications - looking increasingly likely, British manufacturers will need to step up a gear in order to compete internationally, and this will require significant investment in productivity and digitalisation improvements.

"No-one is in any doubt about the financial challenges facing manufacturers, but turning the investment taps off now will have serious medium to long term implications.

"The Government must be alive to this risk and provide the support required to help UK manufacturers through this transition period and beyond. Other countries - perhaps in particular Germany - do provide good examples of consistent long term support to their manufacturing sectors. The UK should look to adopt a similar approach."