stahlmarkt 09 | 2019

14 UK & Northern Europe
»Perfect storm of factors«
Make UK and BDO: All indicators have weakend significantly
Britain’s manufacturers are firmly in a nosedive as the perfect storm of Brexit uncertainty, slowdown in major
markets and trade wars takes its toll according to a major survey published by Make UK, The Manufacturers’
Organisation and business advisory firm BDO LLP. The Q3 Manufacturing Outlook survey comes on the back of the
latest PMI data and shows all indicators have weakened significantly, with investment and domestic orders in
particular turning negative.
The survey also shows that a weaker
currency is providing no solace, contrary to
claims from some politicians and commentators,
with export orders down despite
prices falling. This indicates that foreign
customers are not buying British goods even
though they are 6 % cheaper than this time
last year.
Commenting, Seamus Nevin, Chief Economist
at Make UK, said: »Industry is facing
a perfect storm of factors, compounded by
a hard Brexit which could not be coming at
a worse possible time. In normal circumstances
a global slowdown on its own would be
enough, but add trade wars and the biggest
shock to our economy since the War and
there seems little doubt that, barring a
remarkable turnaround, the sector may be
heading for recession.«
Tom Lawton, Head of Manufacturing at
BDO, said: »Global competition, skills shortages,
lack of a coherent industrial strategy
from government and continuing technological
disruption has made UK manufacturing
a challenging sector for decades. The long
shadow cast by the possibilities of a no deal
Brexit and the uncertainty of recent months
has only added to the difficulties for the sector.
A cliff-edge decision on a deal or no-deal
Brexit will mean a double whammy of continuing
weaker demand for products and fundamental
disruption to supply chains. The
impact on supply chains will be particularly
felt in the UK automotive sector where car
parts are sourced from different European
countries and delivered on a just in time basis
before being finally assembled in the UK.
Already suffering from a fall in output for
14 successive months, car assembly – the
jewel in the crown of UK manufacturing –
All indicators have weakened significantly.
would be particularly hit hard by a no-deal
Brexit. The Government must strain every
sinew to reach a Brexit deal that protects UK
manufacturing.«
According to the survey, the total order
balance, whilst only just remaining in the
positive, fell to +2% in Q3 (down from +8%
in Q2 and +16 % in Q1) indicating the significant
rate of weakening which has taken
place since the start of the year. According
to Make UK, following the current trend it
will almost certainly turn negative in the final
quarter of the year, barring a remarkable
turnaround in the economy.
Output also fell significantly, down to
+4% from +17 % in Q2, indicating there is
little, if any, evidence that stockpiling is building.
This is leaving companies far less prepared
for a no deal situation compared to
earlier this year. After two quarters where
they were below domestic orders, export
orders (+6%) have returned to a level above
domestic orders which have turned negative
at -6%. Such significant weakening cannot
be explained by the poorer global outlook
alone, especially as UK and export prices are
down by 8% and 6% respectively since this
time last year.
With this harsh outlook it is not surprising
that both investment and recruitment intentions
have also weakened significantly. Recruitment
has continued the decline witnessed
for the last four quarters (six if we discount
the annual increase that came in the
Q4 Christmas season last year). Furthermore,
investment intentions, which have been
paralysed for the last year, have now entered
negative territory for the first time since Q3
2016 (the immediate aftermath of the Brexit
referendum).
Copyright: Pixabay
steel market 01.2019