Comment & Analysis
I was asked to provide the insight into the findings. Respondents ranged from companies turning over less than £1 million to global players with significant industry presence, nationally and internationally.
Some of the findings proved quite surprising given the unexpected results and unforeseen outcomes over the last 12 months. Since the UK voted to exit the European Union, not a day has passed without Brexit being in the news. Many believed it would send UK engineering and manufacturing businesses into a spin, but the evidence provided by facts and figures show a different picture.
Perhaps counter-intuitively business is generally buoyant, with confidence being fairly high. I found this surprising as we are seeing increasing pressures caused by
- the rising cost of raw materials, a consequence of the falling value of the pound,
- the continuing and growing crisis around skills shortages
- concerns over the loss of a portion of the workforce who have typically chosen to work in the UK because of the right of free-movement across the EU.
This was reflected in the result with 17% seeing recruiting appropriately skilled staff as the main barrier to growth. Staff attrition due to Brexit is additional concern as 20% of respondents believe they have lost staff or are at risk of losing staff as a direct consequence of the leave vote. As worrying as it is, this average masks the fact that in some parts of the country, the London and the South East for instance, the percentage of affected businesses rises to 35%. Looking back to the national picture, 72% of respondents said staff losses were due to uncertainty over post-Brexit EU workers' rights, with 40% blaming the drop in the value of the pound.
Exporting is high on the list of priorities for Brexit discussions. Results showed that the most popular export destination remains the Eurozone, with 96% of the exporting companies shipping goods there.
This represents a 6% increase from last year. Asia (excluding China) was the second most popular exporting destination, with 62% exporting there (a 15% increase on last year), followed by the United States accounting for 61%. North America (excluding the U.S. and Canada) was the destination which just 18% of respondents’ export goods to, which either means opportunities are being lost or the barriers to exporting there are perceived to be too high.
As a country the UK has little wealth in raw materials, so these need to be imported from further afield. Realistically we should expect to see an increase in the price of both raw materials and components. However, there is an opportunity for businesses to review their end products addressing their potential to reduce their reliance on imports. Taking a circular economy approach and, addressing the lifecycle emissions of their products could offer longevity within the market place. This may lead to the need to change business models, processes and procedures to ensure viability.
There are going to be interesting economic times ahead depending on how the Brexit negotiations of tariffs and trade agreements proceed. The UK could be in a situation where we may face reduced exports, due to increased prices of our products into the EU markets. However, businesses must continue to develop their world class products and look for new opportunities to sell within the UK market or export to tariff free areas. Many companies currently export world-wide so it is important that businesses continue improving our export sales to new territories.
The Institution actively encourages its Members to engage with their regional authorities and the Department for International Trade (DIT), raising any concerns that they may have about future trading and the potential loss of skilled workers.
I will be speaking at a launch for the 2017 MHA Manufacturing & Engineering Report on Thursday 19 October, 8am-11am at South Lodge Hotel, Horsham. To attend please register for your place.
Download the MHA report.