South East: Manufacturers report lower investment amid uncertainty

South East manufacturers have seen an easing in conditions in the last quarter, continuing the downward drift from the very strong picture of growth seen across the board during 2017 according to a major survey published by EEF, the manufacturers’ organisation and accountancy and business advisory firm BDO LLP.

The survey shows a combination of an easing of growth and increased political uncertainty in some global markets, the downward drift in output balances in some sectors from the lofty heights of last year and, a weaker outlook in the construction sector supply chain mean, the outlook is slightly more subdued than it has been for some time.

According to the survey output eased back to +42% although this figure remains very high by historical standards. Total orders also eased back to a balance of +45%, but this figure is also very high by historic standards and the strongest of any UK Region.

The slight easing and mixed picture is reflected in the intention to recruit which has fallen back to +23%, whilst the intentions to invest more than halved to +16% from +34%. This matches the national picture where investment has fallen across the board in response to the continued political uncertainty.

Looking forward, EEF has made a small downgrade to its economic forecasts. It is now forecasting GDP growth of 1.2% in 2018 and 1.3% in 2019 (1.5% and 1.3% respectively from Q1) and manufacturing to grow by 1.9% and 0.5% (down from 2% and 0.6% respectively).

Commenting, EEF region director for the South East, Jim Davison said: “This is a more mixed picture than we have seen for some time and reflects the easing to come from continued political uncertainty in line with the national picture. However, the long-term prospects for companies in the South East that invest in skills and training in particular will remain bright.”

Arbinder Chatwal, director and head of manufacturing at BDO LLP in Southampton, said: “Following a strong 2017, we are starting to see the impacts of the ongoing political and economic uncertainty on manufacturers in the region. However, despite the sector’s slowing performance this quarter, manufacturers still remain cautiously optimistic about the future.

“It is now more important than ever for the Government to not lose sight of the needs of manufacturing, or indeed the wider economy, during the continuing EU negotiations. I have no doubt that manufacturers in the South East will continue to be successful but the right support and trading environment will make a huge difference. Having more transparency from the Government will give them the confidence to invest in skills, automation and digitisation, which are so important to the future of UK manufacturing.”