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Half of UK industry feels opportunities outweigh risks

11 January, 2021

Fears over the impact of the UK’s new trading relationship with the EU and the attractiveness of the UK for investment and talent are clouding the outlook for manufacturers as they enter 2021, according to a survey conducted by Make UK and PwC.

Despite this, 51% of manufacturers believe the opportunities outweigh the risks for their businesses, with 27% fearing that the risks are greater. As a result, 44% of companies are expecting to increase their employee numbers, while 25% are planning to cut jobs. The manufacturers are more confident about the prospects for their own companies than they are for the UK or global economies as a whole.

A third of the 206 manufacturers surveyed during November for the 2021 Make UK/PwC Executive survey fear that the investment prospects for UK businesses will fall after leaving the EU, with just 18% believing they will increase. Just over a quarter of companies (26%) believe exports to the EU will drop, with just 16% believing they will increase.

A third also believe the UK’s ability to attract international talent will be hit, with just 11% believing the UK will be a more attractive destination outside of the EU. According to Make UK, this potentially puts at risk the ambition of the Government’s new immigration system which is designed to encourage the best talent to come to the UK.

Almost half (47%) of the companies surveyed regard customs delays after Brexit as the biggest risk to their business plans, with national and local lockdowns being the second-biggest (46%). For 39%, the increased costs of regulation are the biggest risk, while 14% of companies believe that their biggest risk is a major customer relocating out of the UK.

Despite the concerns over the new trading relationship with the EU, almost 48% of companies expect a significant or moderate improvement for manufacturing during 2021. But 56% expect the UK economy to deteriorate, and 46% are negative about the prospects for the global economy.

While controlling costs remains the biggest priority for manufacturers, 57% say they are investing in new product development, with a similar number also planning capital investments. There is a significant commitment to digital technologies, with 28% of manufacturers planning to invest in technologies such as artificial intelligence for predictive maintenance, with the aim of saving money on repairs and site trips by engineers.

A quarter of companies are looking to re-shore activities from overseas, while a similar number regard finding new or additional suppliers in the UK as a high priority.

Of the companies surveyed, 44% say they committed to training and 37% are investing in apprenticeships, despite the difficulties caused by the pandemic. As a result, 54% expect their productivity to rise during 2021. Some 43% are planning to offer their employees flexible working environments during 2021.

The top five risks identified by UK manufacturers to their 2021 business plans
Source: Make UK / PwC survey, November 2020

Almost a third of the companies surveyed (30%) are planning to enter new markets in 2021. While they expect exports to the EU to fall, almost 40% are looking to expand sales in non-EU markets, with the US (28%) and Asia (27%) being the main targets.

“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,” says Make UK CEO, Stephen Phipson. “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 re-build the economy and take advantage of the opportunities from digital technologies.

“To ensure we cement the role of industry in the future economy,” Phipson adds, “we need to see a strategic vision from Government for the whole economy across the UK. This must go way beyond short-term tinkering and involve an industrial strategy that takes at least a decade-long horizon with the whole of Government putting its shoulder to the wheel to deliver it.”

“The EU trade deal, taken alongside the positive progress with Covid-19 vaccines, will give business leaders the confidence to start planning for the future with greater clarity,” comments Cara Haffey, PwC UK’s manufacturing and automotive leader. “While the need to protect supply chains and boost export products has hit the headlines, the services and maintenance trade that supports this has barely been touched upon.

“With as many as four in five UK firms either developing or already delivering an enhanced service offering to their clients,” Haffey continues, “it’s crucial businesses are able to swiftly respond to our new relationship with the EU – especially relating to people movement – if they are to remain competitive in an increasingly customer focused global stage.

“I found it heartening to see that so many respondents are focusing on strengthening business resilience by investing in their people and diversifying their trade models in 2021. UK manufacturers are resilient by nature and, with the right investor and government support, their agility and drive will enable them to build new trade networks and embrace the clean, green digital revolution, ensuring the UK remains a go-to destination for many more years to come.”

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