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UK factories optimistic for 2018 despite Brexit concerns


Britain’s manufacturers are more upbeat about the state of the global economy than at any time since 2014 and believe demand from overseas will sustain their businesses through another year of Brexit uncertainty, a survey has shown.

The poll by the manufacturers’ organisation EEF and the insurance firm AIG found 40% of the companies questioned were planning for growth in 2018 while 19% were expecting a downturn in their business.

Stronger growth in key export markets is expected to sustain order books, but the survey showed firms remained nervous about the outlook, with the balance of those seeing more risks than opportunities up from 23% in 2017 to 26% in 2018.

Worries about the UK’s planned exit from the EU will continue to dominate in 2018, according to the survey, which was conducted in November before the first phase of Brexit withdrawal negotiations were completed. Concerns were expressed about the effects of rising input costs, loss of staff from the rest of the EU, exchange rate volatility or a disruption in a large market.

Even so, the EEF/AIG survey found businesses optimistic about the outlook. The confident mood in the boardroom was reflected in improvements across the survey, with all indicators – sales to UK and export customers, job numbers and profit margins – recording positive balances for the first time in three years.

EEF’s chief executive, Stephen Phipson, said: “Manufacturers left 2017 in an upbeat mood and are set to outpace the rest of the economy again this year as the growth in global trade continues to gain momentum. That is not to say everything in the 2018 garden is rosy, however, as there are plenty of factors that could puncture this positive picture.

“Chief among these is Brexit which has put the investment outlook on a knife edge. As such, it is essential that the government gets a transition deal as a matter of urgency and sets out with utmost clarity as to what kind of final deal it is looking for.

“In tandem with this it also needs to crack on a pace with its industrial strategy. This will be vital in providing manufacturers with the confidence to invest in strategies to improve their productivity and enter new markets.”

The EEF-AIG survey is in line with other reports from the UK manufacturing sector, which have shown that the acceleration in the global economy and the boost to exports from a weaker pound have helped swell order books.

But despite higher levels of activity, the survey did not pick up any changes in sentiment towards investment, which fell sharply in the deep recession of 2008-09 and has grown sluggishly in the years since.

Only a third of companies surveyed admit to making contingency plans for a no deal Brexit outcome and industry executives seem as likely to be considering reshoring as offshoring in the year ahead in response to Brexit and exchange rate risks. Firms said they expected to spend more money on product innovation and automation in order to increase productivity.

Source- https://www.theguardian.com/business/2018/jan/08/uk-factories-optimistic-for-2018-despite-brexit-concerns-survey-finds