Senior decision makers within SME manufacturers have revealed how the EU referendum result has affected their business optimism in SWMAS’ Q1 Manufacturing Barometer.
Results show over the next two years, almost twice as many senior managers (41%) feel less optimistic about their business’ future as a result of the Brexit vote compared with those who are feeling more optimistic (21%). This result is consistent with the previous Manufacturing Barometer survey, which found that the majority of firms (57%) favoured “remain” over “leave” (27%).
However, the picture is reversed when firms are asked about the impact of the referendum result on their long term future. Over the next ten years 38% of firms are more optimistic as a result of the vote, compared with 24% who are less optimistic.
Uncertainty and Business Confidence
Simon Howes, the Managing Director of SWMAS, said that “the results reflect the considerable uncertainty felt by many businesses regarding the period before we actually leave the European Union and the shape of the eventual trading landscape. The Brexit decision does offer significant opportunity for firms to thrive and export around the world, but the current uncertainty around the eventual trade deals is creating uncertainty that will likely impact on employment and investment in the short term.”
This prediction is backed up by data regarding investment and employment intentions gathered as part of the survey. Only 38% of manufacturers expect to increase capital investment in the next six months, compared with 50% that had expected to increase investment in the next six months when asked just before the referendum. Similarly, only 40% of manufacturers expect to increase employment in the next six months, down from 57% in the pre-referendum survey.
Predictions surrounding sales turnover also took a significant knock, with only 55% of firms expecting an increase, down from 72%. Some of these decreases, however, can be explained by the pre-referendum expectation that the UK would vote to remain in the European Union.
Despite the decreased appetite for investment, South West manufacturers are already developing strategies to respond to Brexit. Respondents indicated that they planned to increase exports (34%), become more productive (17%), and identify more UK customers (16%).
Commenting on their work with firms to respond to Brexit, Simon Howes stated that “firms are not only focused on increasing productivity and reducing costs, but they are also interested in new opportunities. Firstly, firms will increasingly be looking to export opportunities outside of the EU. Secondly, they will be renewing their focus on accessing domestic supply chains, doing more business at home, and exploiting new UK opportunities.”
In the South West one of the biggest opportunities is likely to be the recently approved Hinkley Point C nuclear plant. However, according to Simon Howes, the opportunity does not stop there. Indeed, “South West firms that successfully supply Hinkley will be at a massive advantage for future planned UK nuclear plants. Success here can also lead to export opportunities, alongside access to other energy markets. Being a successful supplier to the Hinkley Project will provide a major reputational boost to firms and it is great news for our region that it is happening here. We are working hard to support local firms to access the project and expect a busy few years ahead.”
