03 Dec 2018
UK manufacturers stock goods in preparation for Brexit
British manufacturers are stockpiling goods as they head towards their slowest year of growth since 2015, as Brexit uncertainty hits demand. Businesses are preparing for the potential shortage of raw materials and likely growth in queues at ports across the UK.
In recent months, production across the manufacturing sector has remained strong, with fears of Brexit resulting in a shortage of stock in case of a no-deal Brexit or prices going up if there was a deal.
As a result, manufacturers have been making as many goods as they can and stockpiling them up in storage.
According to the EEF, precautionary stockpiling has allowed for firms to maintain production levels, despite a sharp drop in export orders over recent months.
Chief executive of EEF, Stephen Phipson, said:
“The moderation in manufacturing performance over the course of this year appears to have gathered pace during the final quarter, with more clouds on the horizon than there have been for some time.
“This should come as no surprise given the significant political uncertainty at home, which is why it is essential that there is an agreement for the UK’s withdrawal as soon as possible.”
EEF has predicted for factory output growth to fall to 0.3% next year, from an estimated 1.1% in 2018.
Manufacturers have come under pressure from subdued global growth, the sterling’s post-referendum devaluation and an increase in protectionist trade policies. These factors have now started taking their toll on confidence and output growth, according to the EEF.
Head of manufacturing at the accountancy firm BDO, Tom Lawton, remarked:
“The sharp decline in export orders is a real cause for concern. There are likely to be a number of causes for the fall in exports this quarter; uncertainty over our future relationship with the EU being the main one.”
He commented that overseas demand had helped sustain manufacturing growth over the last few years, with the EU remaining the most important trading block for UK manufacturers.
“It is crucial that Britain is seen to be open for business with the EU and other key global markets,” he added.