Uncertainty was always going to be a buzzword for 2016, regardless of the
outcome of the referendum, but the manufacturing sector has continued to
demonstrate its resilience and optimism.
The recent headlines were littered with reports that, in the
aftermath of the vote, the Markit UK Manufacturing PMI
dropped to a 41-month low of 48.3, signalling contraction
in the sector. The pessimism was short-lived, however, and
with the dust still settling the PMI recovered to 53.3 in
August, indicating renewed optimism from the sector that
manufacturing would prevail irrespective of the vote to leave
the EU that many manufacturers feared. This record increase
in the index, followed by even more positive September figures,
coincided with manufacturers reporting an increase in output,
new orders and solid inflows of new work. The manufacturing
sector bounced back.
The automotive industry is arguably one of those most
exposed to Brexit, yet the after-effects, if they are to come
at all, haven’t been felt yet. In August, the Society of Motor
Manufacturers and Traders reported a 9.1% year-on-year
rise in vehicle manufacturing output which lifted output to
a 14-year high, driven up predominantly by an increase in
exports of 13.3%. It is probably too early to pin this on the
increased affordability of UK exports, although it certainly
had a part to play. It is just as likely to be, as Mike Hawes of
the Society of Motor Manufacturers and Traders commented,
a function of the huge investment in UK plants such as
Nissan’s huge Sunderland plant, where over 500,000 cars are
assembled each year.
That very plant, Britain’s largest, is however under threat in a
post-EU Britain and its chief executive has repeatedly stated
the importance – in tandem with many other sector leaders
– of not only a quick resolution to Britain’s ongoing trading
relationship with Europe but compensation for companies hit
by tariffs which might be imposed on them. The risk of tariffed
international trade reinforces how important the roles of David
Davis, Philip Hammond and Theresa May will be in securing a
prosperous post-EU future for Britain.
Throughout the turbulent months before and after the vote,
it was encouraging to note that the sector, despite its huge
reliance on import and export markets, remained more upbeat
than the services sector, with consistently higher PMI figures
being posted in June, July, August and September. As if
further evidence is needed, those figures are indicative of a
strong UK manufacturing sector which has, time and time
again, prevailed in the face of adversity and demonstrated
resilience unmatched either by other sectors in the UK or the
manufacturing sector internationally.
There is no question that the impact of the vote has not yet
unravelled and the aftershocks will be felt for at least the next
three years – and possibly much longer – as the government
tries to navigate its exit from the EU and its entry into any
number of trade deals intended to fill the void created by tariff free
access to the world’s largest single market.
The manufacturing sector will again be expected to rise
to the challenge of weathering the storm and embrace
the opportunities posed by Brexit. Early indications are
encouraging.
Closer to home
It has been a time of change for Irwin Mitchell too, with 2016
seeing the completion of our merger with Thomas Eggar and
the creation of our wealth management division, Irwin Mitchell
Private Wealth. Both of these developments significantly
enhance the full-service offering we provide to our clients,
by expanding our geographical reach and your access to our
sector expertise, as well as bringing you additional services to
ensure that we are able to meet the every need of you and
your business. We am particular proud to introduce members
of the wider team to you in this and future editions of Focus on
Manufacturing.
We have no doubt that, for Irwin Mitchell, it will be business as
usual, and we will continue to focus on delivering expert legal
services to you to support you in dealing with the opportunities
and challenges posed by developments in the sector, be they
Brexit related or otherwise. We’ll be on hand to help.
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