Post-Brexit manufacturing investment to slow, report finds
7 Nov 2016
Research conducted by EEF, the manufacturers’ organisation, and banking group Santander reveals manufacturers in the UK will slow investment in plant and machinery over the next two years as a result of increased uncertainty about the demand outlook.
The 2016 Investment Monitor also suggests the current air of political uncertainty caused by Brexit is adding a further layer of complexity to manufacturers’ investment plans.
There is caution amongst businesses, which will inevitably make it more difficult to get big decisions across the line
Lee Hopley, EEF chief economist
According to the survey, 60% of manufacturers are planning to spend the same or less on plant and machinery over the next two years, which is up from 54% recorded in 2015 and 51% recorded in 2014.
The proportion of manufacturers spending a higher percentage of their business turnover – 25% or more – has also fallen by half, to 5% in 2016 from 10% back in 2014, the survey also shows.
Analysing the results, Charles Garfit, head of manufacturing at Santander Corporate and Commercial, said: “It is an understandable reaction from manufacturers to scale back on investment, given the uncertainty, particularly as it follows a relatively buoyant phase for the sector.
“However, manufacturers are also seizing the moment as there are emerging opportunities for ramping up export activity and diversifying operations for manufacturers of all sizes.”
In the short term, however, the survey, which was conducted in March and again in August, shows that investment remains stable, with firms planning to continue investing to satisfy current capital and customer needs.
Commenting on the report, Lee Hopley, EEF chief economist, said: “Fears of an immediate collapse in business investment appear to be unfounded for now. UK manufacturers have been investing at a healthy pace in recent year, and while that rate of increase wasn’t going to continue forever, keeping up with customer needs and the competition is ensuring that investment stays on track for many.
“But, the spike in political risk should not go unnoticed. There is caution amongst businesses, which will inevitably make it more difficult to get big decisions across the line.”
