More than half (51%) of UK manufacturers see the weaker sterling as a key benefit for their business over the next 12-24 months, with 44% of businesses refocusing on internationalisation in light of the UK’s decision to leave the EU, according to a new report by accountancy and business advisory firm BDO LLP in association with the Institution of Mechanical Engineers (IMechE).
Despite over half (51%) of UK manufacturers still believing the UK’s decision to leave the European Union would have a negative impact on the manufacturing sector and their business, they refuse to let it dent their growth ambitions and are not putting investment plans on hold.
According to the BDO/IMechE research, a weaker sterling was cited by 51% of respondents as a key opportunity for growth. Low interest rates (20%) and a lower regulatory burden (17%) were also seen as benefits to their business. However, two thirds (67%) of respondents highlighted currency volatility and a changing political landscape (42%) as the two biggest risk factors to manufacturing caused by the Brexit vote.
Looking ahead, internationalisation is central to the strategy of 44% of the businesses surveyed with over one third (39%) saying they will target markets outside of the EU as a result of the Brexit vote. While not a majority, this is a substantial number given the costs and workload involved for any business in establishing foreign markets.
65% of manufacturers said they are making no plans to reduce their investment intentions – a positive sign for the sector. Of those that are, however, reducing spend on outsourcing (14%) was the most popular choice.
60% of manufacturers are continuing investment in research & development (R&D) and innovation – a key element for growth and competitiveness. 82% of the survey respondents said it is very important for the government to continue R&D and innovation funding in the engineering and manufacturing sector.
Worryingly, 45% of manufacturers have little or no confidence that the current Government can negotiate a favourable trade deal with the EU. 37% favoured the UK remaining a member of European Economic Area (EEA), which would include access to the single market, free movement of people, financial contribution to the EU and accepting some EU regulation.
According to the report, when questioned on an industrial strategy, the single most important factor for UK manufacturers, at 79%, is to have a long-term strategy with a 15-20 year horizon. 69% said an education overhaul was needed to deliver future employees and skills, 60% said improved tax incentives and 50% opted for a dedicated minister for manufacturing.
Tom Lawton, Head, BDO Manufacturing at BDO LLP, said:
“The UK manufacturing sector remains critical to the future success of the UK economy. Despite uncertainty at home and abroad, it is promising to see firms are pushing forward and adjusting their business plans to make the most of the opportunities available. Brexit means a period of significant challenge and vulnerability for the sector. Therefore, it’s important that the Government delivers a practical and robust industrial strategy that is focused on the needs of the manufacturing sector.”
Philippa Oldham, Head of Manufacturing at the Institution of Mechanical Engineers, said:
“Manufacturers are clear that they need confidence in the skills pipeline and the country’s industrial strategy, in order to properly prosper. As the UK gears up to leave the EU, this is more important than ever.
“Despite many manufacturers disagreeing with the Brexit vote, these findings show that they are committed to making it work. As Government begins the difficult task of negotiating the UK’s exit from the EU, it must work closely with industry and manufacturers to ensure we get the best deal for the country.”