Manufacturing has experienced an exceptional year, with positive output and order balances recorded in all regions in the last 12 months, according to the latest survey from the EEF and business advisory firm BDO.
But the EEF warns that this positive picture may not last, with a disorderly Brexit one of a number of concerns over the coming year.
The EEF/BDO annual Regional Manufacturing Outlook found that the North West, Yorkshire & Humber and London & the South East in particular reported exceptional positive balances for output (the number of respondents reporting an increase in output minus those reporting a decrease) in the 12 months from mid-2017.
The report says that the manufacturing sector has been riding a positive wave over the past year, with a general upturn in the global economy, the weaker level of sterling since mid-2016, and a global revival in business investment.
However, there are concerns over whether this uniformly positive picture will be maintained in the coming year, says the report, with three factors potentially disrupting the picture. These are the risk of a disorderly Brexit, the emergence of global trade tensions and the relatively weak investment picture, which could compound regional productivity differences.
Regions particularly vulnerable to a hard Brexit include Wales, where two-thirds of manufacturing exports go to Europe (60% to the EU), the North East (59% to the EU), the East Midlands (54.9% to the EU) and the East of England (52.5% to the EU).
The North West is the biggest regional exporter among the UK regions to the Middle East and North Africa, and the West Midlands is the biggest exporter to Asia, Oceania and the United States, illustrating the potentially disproportionate effects a hard Brexit could have in different regions.
The uncertainty over the post-2019 trading relationship with the EU is compounded by concerns for metal manufacturers in the West Midlands and Yorkshire & Humber as a result of the Trump administration’s recent imposition of tariffs on the EU, the report says.
The report also found huge variations in productivity across the country, with areas such as the North West, Scotland and South West performing well, but with London and the Midlands falling well below the UK average. The North West has the best manufacturing productivity in the UK, at 115.8% of the national average, which is thought to be a result of the pharmaceutical hub in the region.
Download the report from https://www.eef.org.uk/resources-and-knowledge/research-and-intelligence/industry-reports/regional-manufacturing-outlook-2018