South East: EEF annual survey points to another bumpy ride

This year's annual Executive Survey from EEF, the manufacturers' organisation, shows that UK manufacturers expect 2017 to be another year of risks, though they are gearing up to hit its challenges head-on.  Almost half of companies (46%) see more risks than opportunities in the year ahead, but the sector is far from apprehensive.

Though a quarter of firms (25%) expect UK economic conditions to improve, these are outpaced by those steeling themselves for a decline (47%). The view is similar when it comes to global economic conditions where 24% anticipate improvement but 36% predict deterioration during 2017.

This more pessimistic outlook does not taint manufacturers' views of their own future performance though. In the year ahead, an impressive 56% of firms expect to increase their productivity, while half (50%) expect to boost UK sales. There is also good news on the export front, where over four in 10 firms expect to see improvements in volumes - 43% in non-EU and 41% in EU exports. Permanent employees and investment levels also look set to be stepping in the right direction this year. These predictions are firmly grounded in manufacturers' business plans and growth strategies where the focus remains on long-term and broad-based actions.

56% intend to increase productivity through process innovations, while half (50%) aim to increase investment in technology and innovation. 44% will be working with suppliers and customers to ensure supply chain flexibility. Other areas where strong efforts will be made include diversifying into new export markets (41%), brand and marketing (40%) and commercialising new technology and product developments (39%). Most manufacturers place diversifying into new export markets at the top of their list of challenges this year.

Brexit is seen as a significant exacerbating factor in a number of key areas, such as exchange rate movements (74%), rising input costs (66%) and volatility in major markets (45%). Companies also recognise potential impacts from Brexit to the perception of UK sourcing. But, while Brexit has amplified risks, it has not tarnished manufacturers' views on the UK as a manufacturing base. 61% of firms say that the UK is a competitive location for their manufacturing activities - up from 56% last year, and only 13% disagree, down from 18% last year. Although much could change as Brexit negotiations progress, for the time being at least this can be seen as a vote of confidence in the UK.

Jim Davison, South East region director at EEF, said: "With a new digitally-driven industrial era on the horizon and everything to play for, long-term vision and focus is vital - despite the peaks and troughs manufacturers cannot afford to be diverted away from where they need to be. In many ways 2017 is likely to be another unprecedented year of change and uncertainty, but the UK manufacturing sector remains ambitious, resilient and adaptable. 

Brexit risks and opportunities will be amongst a number of issues up for debate on February 22 at EEF’s National Manufacturing Conference, sponsored by Lombard. The world-class line up of speakers includes Jo Malone MBE, the renowned fragrance designer and entrepreneur, and political big hitters Greg Clark MP, secretary of state for business, energy and industrial strategy, and John McDonnell the shadow chancellor.