Some of the UK’s most economically deprived regions face the greatest risk of a double whammy hit to their economies in the event of a no-deal Brexit, according to the latest analysis of regional manufacturing performance.
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, and are also likely 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.
According to Make UK, 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 past 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’s benefitting from the increasing global trend towards investment in industrial digital technologies (IDT) and advanced automation.
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 past year in terms of output, with a high exposure to the food and drink sector which is not just the biggest manufacturing sector, but 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 UK’s best performing sector.
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.
According to Make UK this differing performance in productivity should be a major focus of a renewed push on the government’s Industrial strategy, especially local industrial partnerships.
*All images courtesy of Depositphotos.