Two New Reports Outline Uncertainty In The Sector

A national law firm has called for a swift conclusion to trade talks with the EU as the best outcome for UK manufacturing, following the publication of two new reports into the sector.

The call from lawyers at Irwin Mitchell follows a survey of 364 firms by Make UK, predicting UK manufacturing will contract by 10% this year, with less than one in five operating at full capacity.

The Make UK survey was in contrast to the IHS Markit report, which revealed a rise in output for the fourth successive month and with a Purchasing Manager’s Index (PMI) of 54.1 in September, described a manufacturing sector continuing to recover following the Covid-19 lockdown.

While the IHS acknowledged continuing job losses, the growth in output was put down to the release of delayed projects and people returning to work. Yet despite the surface differences between the two reports, both paint an underlying picture of uncertainty ahead.

Expert Opinion

“While the Make UK report seems the more pessimistic, the HIS survey does not shy away from commenting on the job losses experienced in the manufacturing sector, or the ‘considerable challenges’ that still lie ahead.

“That three fifths still forecast a rise in output for the remainder of 2020, demonstrates the resilience of UK manufacturing to bounce back from adversity. That said in a time of unprecedented uncertainty with inevitable job losses on the horizon, coupled with operating at less than full capacity, means the recovery will remain fragile.

“Some firms are using this period to prepare for Brexit and build up stocks ahead of further anticipated disruption and those who put Brexit preparations on hold during lockdown need to wake up and acknowledge that even if a deal is struck their will likely still be confusion around what it means.

“The lockdown and the continuing coronavirus crisis represents a very real existential threat to many businesses – not just to immediate profitability, but to long term survival and while the impact of local lockdowns and further more widespread lockdowns continues to bite, Brexit is no less important and uncertainty over both is reflected in these reports.

“Uncertainty remains a key concern, made clear in the HIS survey and in the abandoning of investment plans alluded to in the Make UK report. While businesses must be ready for the changes that are coming on 1 January, regardless of any deal with the EU, the government needs to deliver clarity on coronavirus and Brexit, as only this offer a glimpse of hope that the sector needs to deliver a much needed boost ahead of the challenges now firmly on the horizon.” Dorrien Peters - Partner