Thread by @SNevin1

NEW: @Make_UK tomorrow publish our latest quarterly study of economic performance.

So what are manufacturers telling us?

THREAD:

Well on the positive side, this quarter output has remained strong overall despite some sectors, notably steel and automotive, struggling.

Customer orders are, however, decreasing, meaning recent output has not been driven by demand.

For the second quarter in a row, domestic orders have exceeded export orders, not because domestic orders have gone up but because export orders are going down.

Members report that foreign customers are abandoning their British suppliers due to Brexit uncertainty.

Right at the time we need to be trading more internationally, orders from Asia and Europe in particular have dropped to their second lowest since the referendum in 2016 (Q1 2019 was the lowest).

“Global Britain” is not getting off to a good start!

Stockpiling ahead of the original March 29th Brexit deadline was the highest level ever recorded in the G7. The result, as we now know, is that imports rocketed up by a whopping 11% in Q1 this year. Demand for warehouse space went up an unprecedented 32% as well because of this.

Firms haven’t just been stockpiling goods, however. They’ve also been hiring lots of workers - with employment levels at the highest on record - but this is not a sign of growth. It is a consequence of needing temporary extra staff to help prepare for a possible no deal Brexit.

Thanks to increased producer price pressures coming from oil and the tightest labour market in history, input costs have gone up but profit margins have gone down. Consequently, cash flow is now becoming a real problem for many of our members.

Productivity growth and output per worker have also been negative for the last 3 quarters (albeit partly because of increased hiring of staff) suggesting the underlying health of many businesses is worsening.

While wages have risen by 3.3% for the overall economy (1.5% above inflation) wages in manufacturing only rose by a lower 2.2%, even though manufacturing jobs are usually paid more than the national average.

Our survey, which includes April (the key month for annual salary reviews) shows that 10% of pay settlements have been deferred, a figure significantly higher than for the same period in recent years.

Worse, once settlements “under review” are included this figure rises to 25%, whilst a further 5% of settlements saw pay frozen.

Ominously, business investment has also contracted for 4 quarters in a row - the first time this has happened since the 2008 Global Financial Crisis.

Members indicate that this is not firms sitting on piles of cash but rather that cashflow is weakening as customers desert the UK

These figures highlight the real world consequences for companies and their employees of the ongoing Brexit uncertainty.

Whilst there are a number of factors at play, the slowdown in the global economy amongst them, these figures provide further evidence for why it would be the height of economic lunacy to take the UK out of the EU with no deal in place.

As long as politicians keep flirting with a potential and irresponsible no deal Brexit the damage to companies and peoples’ livelihoods will continue to be felt in constituencies across the UK.

Read the full #ManufacturingOutlook Q2 2019 report here: makeuk.org/Insights/Repor…

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