UK manufacturers are making the most of weak sterling and focusing on international opportunities, according to a new study from accountancy and business advisory firm, BDO LLP, in association with the Institution of Mechanical Engineers (IMechE).
According to the study, more than half (51%) of UK manufacturers see the weaker sterling as a key benefit for their business over the next 12-24 months; with 44% of businesses refocusing on internationalisation in light of the UK’s ‘Brexit’ decision to leave the EU.
Despite more than half (51%) of UK manufacturers still believing the UK’s decision to leave the European Union would have a negative impact on the manufacturing sector and their business, they refuse to let it dent their growth ambitions and aren’t putting investment plans on hold.w
Download a copy of the BDO/IMechE Manufacturing Prospects Report, click here.
Weaker sterling was cited by 51% of respondents as a key opportunity for growth. Low interest rates (20%) and a lower regulatory burden (17%) were also seen as benefits to their business. However, two thirds (67%) of respondents highlighted currency volatility and a changing political landscape (42%) as the two biggest risk factors to manufacturing caused by the Brexit vote.
Looking ahead, internationalisation is central to the strategy of 44% of the businesses surveyed, with more than one third (39%) saying they will target markets outside of the EU as a result of the Brexit vote. While not a majority, this is a substantial number, given the costs and workload involved for any business in establishing foreign markets.
More than a two third (65%) of manufacturers said they are making no plans to reduce their investment intentions – a positive sign for the sector. Of those that are, however, reducing spend on outsourcing (14%) was the most popular choice.
Most manufacturers (60%) are continuing with investment in research & development and innovation. With 82% of the survey respondents saying it is very important for the government to continue R&D and innovation funding in the engineering and manufacturing sector.
Worryingly, 45% of manufacturers have little or no confidence that the current government can negotiate a favourable trade deal with the EU. Just over a thrid (37%) favoured the UK remaining a member of European Economic Area (EEA), which would include access to the single market, free movement of people, financial contribution to the EU and accepting some EU regulation.
According to the report, when questioned on an industrial strategy, the single most important factor for UK manufacturers, at 79%, is to have a long-term strategy with a 15-20 year horizon. Almost three-quarters of respondents (69%) said an education overhaul was needed to deliver future employees and skills, 60% said improved tax incentives and 50% opted for a dedicated minister for manufacturing.
Head of manufacturing at BDO LLP, Tom Lawton commented: “The UK manufacturing sector remains critical to the future success of the UK economy. Despite uncertainty at home and abroad, it is promising to see firms are pushing forward and adjusting their business plans to make the most of the opportunities available.
“Brexit means a period of significant challenge and vulnerability for the sector. Therefore, it’s important that the Government delivers a practical and robust industrial strategy that is focused on the needs of the manufacturing sector.”
Head of manufacturing at the Institution of Mechanical Engineers, Philippa Oldham explained: “Manufacturers are clear that they need confidence in the skills pipeline and the country’s industrial strategy, in order to properly prosper. As the UK gears up to leave the EU, this is more important than ever.
“Despite many manufacturers disagreeing with the Brexit vote, these findings show that they are committed to making it work. As government begins the difficult task of negotiating the UK’s exit from the EU, it must work closely with industry and manufacturers to ensure we get the best deal for the country.”