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Gloucestershire Business News

Manufacturing warns of no deal "knockout blow"

A no deal Brexit could deliver a "knockout blow" to a British manufacturing industry which is on the ropes, according to a major trade body which has cut its forecast growth for the next year.

Make UK painted a darkening picture for exports in a major survey conducted with business advisory firm BDO.

The survey forecasted a 12 per cent drop in output this year in the midst of the coronavirus pandemic with Make UK downgrading its growth forecasts for 2021 from 5.1 per cent in the last quarter to just 2.7 per cent.

And it warned that leaving the EU with no trade agreement would revise the figure agains given the potential for significant damage to manufacturing, with the motor vehicles sector in particular especially fearful of the potential impact of any tariffs.

Make UK chief executive Stephen Phipson said: "Manufacturing has stepped back from the abyss that it stared into earlier in the year, but make no mistake it is going to be a long haul back with talk of a V-shaped recovery nothing more than fanciful.

"Having endured more than four years of political turmoil, combined with the pandemic, many in industry are feeling like an exhausted boxer in the final round of a bout, with a no deal exit from the EU potentially landing a knockout blow."

He continued: "Should this happen the nascent recovery is likely to go into reverse with significant damage to manufacturing and job losses following in already hard-hit areas and sectors.

"It is essential that the first step towards a fuller recovery is provided by a comprehensive tariff and, quota free, trade agreement with the EU, with a sensible range of easements to allow business some time to adapt."

In addition to the darkening picture for exports, the survey shows investment intentions have been substantially negative for three quarters in a row, a trend which Make UK believes is likely to worsen in the event of the further political turmoil no deal would create.

According to the survey the balance on output improved to minus five per cent, compared to -36 per cent and -56 per cent in the previous two quarters.

While the output balance for the next quarter is forecast to improve slightly to minus three per cent, it highlights an anaemic picture ahead for the sector.

The survey showed a similar pattern for total orders with the balance improving to minus three per cent from -40 per cent and -53 per cent in the previous two quarters.

But the export order balance is forecast to drop sharply to -14 per cent, highlighting the concerns manufacturers have about the impact on exports as the UK finally leaves the EU.

While the balance on investment intentions also improved to -11 per cent from -32 per cent and -26 per cent respectively in the previous two quarters, it has been negative for three quarters in succession.

While this may reflect the combination of the impact of the pandemic, political uncertainty and the debt many companies will have accumulated to stay afloat, to give some perspective of the extent of cutbacks the balance in the first quarter was +20 per cent.

The cuts to investment follow the latest Office for Budget Responsibility forecasts that cumulative business investment by 2025 will be 10 per cent lower than forecast in March.

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