Britain’s
manufacturers have warned that some of the UK’s most economically deprived
regions are at risk of a double whammy hit to their economies in the event of a
‘no deal’ Brexit in new analysis of regional manufacturing
performance published by Make UK, the manufacturers' organisation and
business advisory firm BDO LLP.
The
annual Make UK/BDO Regional Manufacturing Outlook highlights manufacturers'
contribution to economic regions of the UK in terms of output, jobs and
investment. It also highlights the exposure of those regions with a high
dependence on exports to the EU are already suffering losses, but are
alsolikely to be most at risk from a 'no deal' Brexit, barriers to trade and
tariffs.
According
to the analysis Wales (almost two thirds), the North East and Yorkshire &
Humber (both 60%) have a very high exposure to trade with the EU. Combined the
critical contribution of manufacturing to the economy overall
in Wales and the North East is way above average (17.5% and 15.2%
respectively), the risks of 'no deal' are likely to be felt
disproportionately by these areas in particular. The East Midlands is also
not too dissimilar with manufacturing accounting for almost a fifth of its
economy and the EU being its biggest market accounting for just over half its
exports.
Given Wales and the
North East both contain some of the most economically disadvantaged areas
of the UK, a hard Brexit is likely to prove especially damaging for these areas
in particular.
For the
first time the analysis also shows a clear correlation between regional
performance and exposure to industry sectors and global trends and
structural change.
London
and the South East was the best performing region in the last year and is now
an emerging industrial powerhouse being the second largest manufacturing region
worth £28.1bn annually. With its high exposure to the electronics sector it is
benefitting from the increasing global trend towards investment in
4IR related technologies such as robotics and artificial intelligence.
Other
star performers were the North West which remains the biggest region in terms
of output (£28.5bn), as well as the most productive with high value
sectors such as automotive, aerospace and pharmaceuticals. The East Midlands
was the most improved region over the last year in terms of output, with a high
exposure to the food and drink sector which is not just the biggest
manufacturing sector, but was also the second most improved sector in terms of
increased exports.
By
contrast the ongoing difficulties in the automotive sector are having an
ominous impact on manufacturing and those regions most closely linked to
it. This impact is being seen in worrying declines in output, orders and
collapsing investment levels. This has notably impacted on the West Midlands
and the North East which have reported weak future investment and recruitment
plans.
Furthermore,
the analysis also shows the clear impact on the metals sector from the
ongoing trade war between the US and China while the mechanical equipment
sector continued to suffer from the downturn in capital investment across the
globe which has taken place since the stellar year of 2017 when it was the best
performing sector in the UK.
The
report also shines a light on manufacturing productivity with huge variations
across the country. The North West is the most productive region in the UK
(114.5% of the national average) with Scotland and London and the South East
also strong performers. By contrast the East Midlands is the least productive
region (84.7% of the national average) with Yorkshire & Humber and the
North East close to the bottom of the rankings. This differing performance in
productivity should be a major focus of a renewed push on the Government's
Industrial strategy, especially local industrial partnerships.
Commenting,
Stephen Phipson, Chief Executive at Make UK, said: "Although Brexit
stockpiling put manufacturing on steroids for a little while, the industry has
since gone almost cold turkey and the overall picture over the last year now
shows Brexit, global trade wars and the economic downturn in major markets are
menacing UK manufacturers.
"In
particular, there are some regions of the UK with a very high exposure to trade
with the EU and who are likely to suffer a disproportionate double whammy to
their economies and jobs from a damaging 'no deal' exit.
“Policymakers
need to be on high alert to deal with the fallout from this to ensure
manufacturers do not suffer collateral impact as a result. This underlines why
we strongly support calls for the Government to agree s deal with the EU which
protects and supports British manufacturers.”
Tom Lawton, Head of Manufacturing at BDO said: “The
long term uncertainties around Brexit, minimal progress on the
Government’s industrial strategy, technological disruption, skills
shortages and heightened global competition are all taking their toll on the
performance of manufacturers across the UK."
