Two-thirds of manufacturers fear UK recession in the next year

Two-thirds of manufacturers fear the UK will enter recession in the next year, a survey has found.

Uncertainty around Brexit and the effects of international trade wars are also negatively affecting manufacturers’ confidence, said Lloyds Bank’s commercial wing after surveying more than 200 British companies.

Business confidence based on the outlook for sales, orders and profits has dropped from 30% in January to 24% for the manufacturers, two-thirds of which are exporters.

“The UK manufacturing sector is truly global so it’s no surprise that the prospect of a trade war between the US and China is on the minds of many,” said Dave Atkinson, head of UK manufacturing at Lloyds Bank Commercial Banking. Fifty-three per cent were concerned about an all-out trade war between the two largest economies. “This is a reminder that exporters must closely monitor geopolitical tensions.”

Cited by 26%, Brexit uncertainty remains the biggest challenge for manufacturers. Forty-one per cent said a ‘no-deal’ result would have a negative impact on business, compared to 24% who said it would be positive.

Two-thirds said they were worried about the potential effect of currency movements over the next six months, while 55% reported difficulty in hiring skilled staff, up from half at the start of the year.

Only 5% of firms plan to increase staff numbers in the next six months, down from 13%, while only 7% plan to increase investment in the next six months, down from 15%.  

The sector’s business confidence is nonetheless broadly in line with the UK average of 25%, Lloyds said, and firms still plan new jobs and investments even if they are at lower levels.

“As always, manufacturers are approaching these challenges with resilience,” said Dave Atkinson. “We’re hearing anecdotal evidence of firms starting to ‘reshore’ supply chains in response to uncertainty about the future relationship with the EU, and businesses are building strong customer networks that continue to bolster their order books.”