The impending European Union referendum has helped to create a toxic mix for the manufacturing sector, with the number of companies planning to make investments falling to a six-year low.
The Brexit uncertainty, fears over rising pension, minimum wage and apprenticeship levy costs and global economic volatility have forced manufacturers to put on hold investments in plant and machinery and have checked plans to create more jobs.
Negative sentiment within the sector has prompted the EEF manufacturers’ organisation to further cut its economic forecasts, taking GDP predictions for 2016 down to 1.9 per cent, against the Office for Budget Responsibility’s forecast of 2.4 per cent.
The EEF expects the UK manufacturing sector to grow by only 0.6 per cent this year, down from its previous forecast of 0.8 per cent, which itself was slashed in half three months ago.
Against the backdrop of a crisis in the steel industry that has cost 6,000 jobs in six months and featured the failure of Caparo Industries and cuts at the specialist Sheffield Forgemasters foundry, the latest EEF quarterly report is decidedly downbeat.
Advertisement
The balance of companies saying they expect to be investing has fallen to -8 per cent, while there is a net zero confidence in the prospect of increasing workforce size. “Investment intentions are at their worst in six years,” Lee Hopley, the EEF’s chief economist, said. “Part of it is the referendum, but there is also global uncertainty in the markets and uncertainty about the rising costs of doing business.”
A net 13 per cent of respondents said that UK orders were down, a net 10 per cent said that export orders were down and a net 5 per cent said that output was off.
Ms Hopley said the good news was that the orders and output figures, while negative, were better than they had been in the last quarter, but she added: “We should not be getting the deckchairs out yet.
“What these findings make clear is that manufacturers face challenges enough. They certainly don’t need more pressure from domestically generated uncertainty or costs.”