Editor's comment: Perfect storm batters UK manufacturing...

Author : Mark Gradwell | Editor | EPDT

03 October 2019

Mark Gradwell, Editor, EPDT

As we approach the next key date in our ongoing Brexit soap opera, it seems #UKMFG is facing a perfect storm. Aside from the self-induced political & economic uncertainty (some might say paralysis) that is the B-word, we’re also having to contend with Trump’s ongoing, escalating & unpredictable US-China trade wars...

This editorial was originally featured in the October 2019 issue of EPDT magazine [read the digital issue]. Sign up to receive your own copy each month.

Meanwhile, the release of the latest UK manufacturing PMI data and Make UK’s Q3 Manufacturing Outlook both point to a continued slowdown of the global economy...

As uncertainty stifles both domestic and export markets, UK manufacturing PMI is now at a 7-year low. Steep reductions in new orders were registered across consumer, intermediate and investment goods, contributing to ongoing downturns in output across all three product categories. The decrease in new orders was linked to weaker domestic and global economic conditions, low market confidence, Brexit concerns, business uncertainty and a slowdown in customer spending. New export business also contracted sharply amid ongoing global trade tensions, slower global economic growth and Brexit uncertainty – with reports that some EU-based customers were routing supply chains away from the UK due to Brexit.

This is backed up by Make UK’s Q3 Manufacturing Outlook, which warns 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. The survey shows that all indicators have weakened significantly, with investment and domestic orders in particular turning negative. It also shows that a weaker currency is providing no solace, contrary to claims from some politicians and commentators, with export orders also down, despite prices falling.

Seamus Nevin, Chief Economist at Make UK, commented: “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.

With this harsh outlook, it’s 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 Q4’s seasonal Christmas increase). Furthermore, investment intentions, paralysed for the last year, have now entered negative territory for the first time since the immediate aftermath of the Brexit referendum.

For electronics in particular, which is already coping with ongoing component shortages and price fluctuations (driven by the proliferation of electronic intelligence and connectivity), the impact of the trade wars and the resulting tariffs is starting to bite. According to the CTA (Consumer Tech Association), the trade war has already cost electronics companies $10 billion since July 2018 – and it’s about to get worse from September. While previous batches of tariffs already in effect were mainly focused on parts and components, the latest raft of tariffs will also begin to impact imports of finished goods. Up till now, many leading electronics companies (including Apple) have absorbed increased costs, but surely it can’t be long before these additional tariffs result in price rises for consumers?

At least before the month is out, there should be a little more clarity on where Brexit is headed next. Right, folks?...

EPDT October’s issue contains features on Sensor technologies & Automotive applications. Read more on what's inside EPDT this month...


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