Manufacturers unfazed and aiming to make most of post-Brexit opportunities - BDO

The research, carried out in association with the Institution of Mechanical Engineers (IMechE), found that despite over half (51 per cent) 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 are not putting investment plans on hold.

According to the BDO/IMechE research, a weaker sterling was cited by 51 per cent of respondents as a key opportunity for growth. Low interest rates (20 per cent) and a lower regulatory burden (17 per cent) were also seen as benefits to their business. However, two thirds (67 per cent) of respondents highlighted currency volatility and a changing political landscape (42 per cent) as the two biggest risk factors to manufacturing caused by the Brexit vote.

Looking ahead, internationalisation is central to the strategy of 44 per cent of the businesses surveyed with over one third (39 per cent) 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.

65 per cent 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 per cent) was the most popular choice.

60 per cent of manufacturers are continuing investment in research & development (R&D) and innovation – a key element for growth and competitiveness. 82% of the survey respondents said it is very important for the government to continue R&D and innovation funding in the engineering and manufacturing sector.

Worryingly, 45 per cent of manufacturers have little or no confidence that the current Government can negotiate a favourable trade deal with the EU. 37 per cent 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 per cent, is to have a long-term strategy with a 15-20 year horizon. 69 per cent said an education overhaul was needed to deliver future employees and skills, 60 per cent said improved tax incentives and 50 per cent opted for a dedicated minister for manufacturing.

Martin Bell, head of BDO LLP’s manufacturing sector team for Scotland, said:“The manufacturing sector remains critical to the future success of the UK economy and that is particularly the case in Scotland where other traditionally successful sectors are under pressure or experiencing a downturn. Despite uncertainty at home and abroad, it is promising to see Scottish firms 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 manufacturing sector and therefore it’s important that the Government delivers a practical and robust industrial strategy that is focused on the needs of the manufacturing sector. Hopefully we will see some announcements to help this in both the UK Autumn Statement later this month followed by the Scottish Budget in December.”

Philippa Oldham, head of manufacturing at the Institution of Mechanical Engineers, said: “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.”