BREXIT – WHERE DOES THE ECONOMY GO FROM HERE?

Article Source: The Engineer

There is some irony in the fact that in our first month as Make UK, we are facing the last month as a member of the European Union unless political events overtake this column. In the wake of the Spring Statement yesterday and the vote to take ‘no deal’ off the table it remains to be seen where the political debate and the economy go from here.

As far as the economy goes, having made the transition to the new name successfully at our annual conference last month, we followed with our first quarter survey which paints an interesting snapshot of the shifting sands of world trade. While the extent of stockpiling by British manufacturers is clearly evident, providing a temporary boost to output, what is happening to demand from abroad is no less important, especially where our biggest export market is concerned.

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Official data has indicated a significant downturn in the desire for imports from the giant of the Far East

Since the heady days of 2017 when there was a synchronised upswing across all major global markets, global trade has been on a gradually downward trend with the balance in export orders at the end of last year half what they were in the previous quarter and just a third of the level seen at the end of 2017.

The start of this year showed no signs of recovery with Asia absent from the top three markets for UK goods for the first time since 2016. Its place has now been claimed by the Middle East, as much a reflection as what has been happening to demand in that part of the world but equally a reflection of what has been happening to demand in Asia, especially China.

Not just our surveys but official data has been pointing to a significant downturn in the desire for imports from the giant of the Far East with the appetite for UK and European manufactured goods down from the peaks that have been registered in recent times. The impact on industries such as the automotive sector has been clear for all to see, leading to some painful announcements in recent months which will have a knock on effect down the supply chain.

The impact of a downturn in demand for UK goods on industries such as the automotive sector has been clear for all to see

But if the news from Asia isn’t great then that from Europe isn’t much better. Despite remaining the top market for UK goods demand from Europe is at its weakest for three years with Italy in recession and Germany avoiding it recently by a whisker. Across the board the European PMI data have been poor recently. While some of the effect is clearly Europe coming down from the highs of 2017 it would be naïve to assume that some of it is not down to the huge uncertainty created by Brexit with orders on hold as importers worry about their goods being stuck at ports and not able to cross the UK border freely.

For UK manufacturers this is a highly uncertain time and the poll which Make UK published on the day of the annual conference showed that, for some, decisions have already been taken to shift production elsewhere in the EU. The same poll also showed that leaving the EU without a deal would make the UK a less attractive location as a destination for manufacturing with just one quarter believing it would be more attractive.

So as we approach possibly the final weeks of the UK’s membership of the European Union it is to be hoped that politicians of all parties do what many have failed to do so far and come to their senses to put the national interest first. If they do so then we can move to a transition period during which we can map out a future trading relationship which can be mutually beneficial. Within the next few weeks we are about to find out.

This piece of promoted content was supplied by Make UK (formerly EEF)


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