Britain’s manufacturers are in despair at the failure of politicians to end the Brexit impasse, according to the CBI, which reported a drop in output in March as businesses cut back production.
Export order books increased among the 358 manufacturers in the survey, supported by the low level of sterling, but this was cancelled out by a decline in domestic demand to leave the industry in a weakened position ahead of a decision in parliament on Brexit.
The total orders balance fell back to +1% in March after picking up to +6% in February from a three-month low of -1% in January, the CBI said.
Prospects for the industry were likely to worsen following the recent slowing in the global economy, which was expected to undermine the demand from foreign buyers for UK manufactured goods.
“All in all, though,” it said, “the continued threat of a no-deal Brexit poses the biggest risk to the outlook for UK manufacturers.”
Tom Crotty, the group director of the chemicals firm Ineos and chair of the CBI’s manufacturing council, said: “Manufacturers are in despair at the unacceptable failure of politicians to end the Brexit impasse.
“Every day that goes by without a resolution results in more businesses putting off investment and stockpiling goods in order to soften the blow from a potentially disastrous no-deal Brexit scenario.”
Crotty, whose boss Jim Ratcliffe has come out in support of Brexit, added: “It is crucial that Brexit uncertainty is lifted as a matter of urgency. Only then can manufacturers begin to move forward and shift our attention on to resolving the long-term challenges facing the sector – such as solving our skills challenge and raising productivity.”
Illustrating the sector’s weakness, firms reported that much of their activity was devoted to stockpiling while the threat of no-deal Brexit remained, leaving investment decisions to a later date.
Anna Leach, the CBI’s head of economic intelligence, said: “Brexit uncertainty is one of the biggest threats to growth in the UK manufacturing sector – both current and future – as firms prioritise stockpiling goods over investing in the future of their business.
“It is essential that politicians eliminate the threat of a no-deal Brexit in order to alleviate manufacturers’ fears of border delays, ruptured supply chains and tariffs on exports to the EU.”
An extra question included in the survey asked manufacturers how Brexit uncertainty was affecting the outlook for their business. A quarter of respondents reported stockpiling raw materials and finished goods. Others mentioned “depressed investment and low demand due to uncertainty”, the CBI said.
A breakdown of the sector found that output expanded in the food, drink and tobacco, chemicals and metal manufacture sectors. Declines in output were reported by firms in the mechanical engineering, paper, printing and media, and motor vehicles and transport equipment sectors.
“Looking ahead, firms anticipate output volumes to grow at a broadly similar pace in the next three months,” the CBI said.
Howard Archer, the chief economic adviser to the EY Item Club, said: “If the UK does ultimately leave the EU with a deal, be it at the end of March, June or after an extended delay, manufacturers will be fervently hoping that this reduces uncertainty, boosts confidence and lifts business demand for capital goods as well as consumer demand for big-ticket manufactured goods.
“Any delay of Brexit would be likely to extend the uncertainty hampering manufacturers.”
