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No-deal Brexit would be ‘catastrophic’ for UK manufacturing

26 February, 2019

Almost half (44%) of all UK manufacturers have taken some form of action to prepare for the UK leaving the European Union, according to a survey of 429 senior decision-makers in UK manufacturing firms conducted by YouGov for Make UK, the new name for EEF. Among larger companies (with more than 250 employees), the figure rises to 70%, and with 47% of them either having adjusted their supply chains or considered doing so.

Citing these figures at Make UK’s annual dinner in London last month, its chair, Dame Judith Hackitt, warned that a no-deal Brexit would be “catastrophic” for the manufacturing sector, while applying zero tariffs on imported goods “would kill off some sectors of industry overnight”.

Dame Judith pointed out that “companies have already taken action to move production overseas and the prospect of leaving with no deal means the UK will be a far less attractive location for manufacturing in the future.

“The clock has almost run down and it is now essential that the pantomime in Parliament ends and politicians of all persuasion come together to agree a deal that protects the future of manufacturing and people’s jobs right across the UK.

Turning to those who accuse manufacturers of scaremongering, Dame Judith said: “This is very real and very serious. The ninth-largest manufacturing economy in the world needs to be assured that our contribution to UK prosperity is recognised and valued.

“I am saddened by the way that some of our politicians have put selfish political ideology ahead of the national interest and people’s livelihoods and left us facing the catastrophic prospect of leaving the EU next month with no deal,” she added.

The Make UK survey shows that most common form of Brexit preparation among UK manufacturers is stockpiling, with 23% of companies reporting that they done this (doubling to 46% among large businesses). Of those who have begun stockpiling, more than half (56%) have experienced some difficulty in financing the inventory.

Dame Judith Hackitt: time to end the pantomime

Other preparatory measures include setting aside contingency funds (reported by 17% of firms), currency hedging (16%), adjusting supply chains (16%) and raising prices (14%). So far, just 8% have cut jobs.

Of those that have adjusted their supply chains, 35% have offshored, with the EU being the most popular destination. But 26% have brought production back to the UK, with most of this coming from the EU. More than half (51%) report that adjusting their supply chain has raised their costs, with 10% saying that is saving them money.

The executives were also quizzed on what changes they would like to see to encourage manufacturing in the UK. More than half (53%) cited a lower tax burden, while 52% wanted the UK government to keep energy costs at or below the EU average. Other factors that would boost UK manufacturing include improved availability of suitably qualified employees (cited by 42% of the respondents), a simpler tax system (41%) and improved transport infrastructure (39%).

When asked what they consider to be “great” about the UK manufacturing sector, 61% pointed to the branding and reputation of UK-made goods, 54% chose the skills of the workforce, and 39% cited the ease of moving goods in and out of the country.

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