Fears over the impact of the UK’s new trading relationship with the EU and the attractiveness of the UK for both investment and talent are clouding the outlook for manufacturers as they enter 2021, according to a new survey by Make UK and PwC.
The 2021 Make UK/PwC Executive survey shows that a third of companies believe the investment prospects for UK businesses will decrease having left the EU, with just 18% of companies believing they will increase. In addition, just over a quarter of companies (26%) believe exports to the EU will fall, with 16% believing they will increase.
A third believe the UK’s ability to attract international talent will decrease.
Asked about the biggest risks facing their companies, 47% cited customs delays. This was followed by concerns over national and local lockdowns (46%), increased costs of regulation (39%) and relocation of a major customer out of the UK (14%).
Make UK chief executive Stephen Phipson said: “The transition to new trading arrangements with the EU was always going to be the biggest challenge facing manufacturers this year, and the fact we have an agreement in place doesn’t alter that. However, just as the sector rose to the challenge of aiding the national effort at the start of the pandemic, it is clearly set to do so again as we rebuild the economy and take advantage of the opportunities from digital technologies.”
He called for a strategic vision from the Government for the whole economy, with “an industrial strategy that takes at least a decade long horizon”.
PwC UK manufacturing and automotive leader Cara Haffey said the EU trade deal, alongside progress with Covid-19 vaccines, would give business leaders greater confidence in planning for the future. But she warned that maintenance services increasingly offered by manufacturers had been neglected: “While the need to protect supply chains and boost exports has hit the headlines, the services and maintenance trade that supports these has barely been touched on. It’s crucial businesses are able to respond swiftly to our new relationship with the EU, especially relating to people movement, if they are to remain competitive.”
Despite companies’ concerns, almost 48% of companies expected a significant or moderate improvement for manufacturing in 2021, though at the same time 56% expected a deterioration in the UK economy as a whole.
After the reductions in employee numbers in 2020 in response to the pandemic, 44% of companies expected to recruit more employees, compared with 25% who are planning to reduce staff. Though controlling costs remains companies’ biggest priority, 57% of manufacturers are investing in new product development, with a similar number planning capital investment. A quarter are looking to re-shore overseas activities, while 25% are looking to identify new or additional suppliers in the UK as a high priority.
Despite the difficulties created by the pandemic, 44% are committed to training and 37% are investing in apprenticeships. The survey of 206 companies was conducted between 11 and 30 November 2020.