The 11th hour – where does the economy go from here?

Posted on 15 Mar 2019 by The Manufacturer

We are facing the last month as a member of the European Union unless political events overtake this column. Make UK’s first quarter survey, in association with BDO, paints an interesting snapshot of the shifting sands of world trade.

While the extent of stockpiling by British manufacturers is clearly evident, providing a temporary boost to output, what is happening to demand from abroad is no less important, especially where our biggest export market is concerned.

Since the heady days of 2017 when there was a synchronised upswing across all major global markets, global trade has been on a gradually downward trend with the balance in export orders at the end of last year half what they were in the previous quarter and just a third of the level seen at the end of 2017.

Port Terminal Panorama Industry Global Trade Exports Economy Supply Chain Stock - image courtesy of Depositphotos.

The start of this year showed no signs of recovery with Asia absent from the top three markets for UK goods for the first time since 2016. Its place has now been claimed by the Middle East, as much a reflection as what has been happening to demand in that part of the world but equally a reflection of what has been happening to demand in Asia, especially China.

Make UK surveys and other official data have been pointing to a significant downturn in the desire for imports form the giant of the Far East with the appetite for UK and European manufactured goods down form the peaks that have been registered in recent times.

The impact on industries such as the Automotive Sector has been clear for all to see, leading to some painful announcements in recent months which will have a knock-on effect down the supply chain.

But if the news from Asia isn’t great then that from Europe isn’t much better. Despite remaining the top market for UK goods, demand from Europe is at its weakest for three years with Italy in recession and Germany avoiding it recently by a whisker.

Across the board the European PMI data (an indicator of economic health for manufacturing and service sector) have been poor recently.

While some of the effect is clearly Europe coming down from the highs of 2017 it would be naïve to assume that some of it is not down to the huge uncertainty created by Brexit with orders on hold as importers worry about their goods being stuck at ports and not able to cross the UK border freely.

World flags World Trade International America European Union Exports Imports Supply Chain Stock - image courtesy of Depositphotos.

For UK manufacturers this is a highly uncertain time and the poll which Make UK published on the day of the National Manufacturing Conference showed that, for some, decisions have already been taken to shift production elsewhere in the EU.

The same poll also showed that leaving the EU without a deal would make the UK a less attractive location as a destination for manufacturing with just one quarter believing it would be more attractive.

So, as we approach the final weeks of the UK’s membership of the European Union it is to be hoped that politicians of all parties do what many have failed to do so far and come to their senses to put the national interest first. If they do so then we can move to a transition period during which we can map out a future trading relationship which can be mutually beneficial.

Within the next few weeks we are about to find out.

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