Research by Make UK and business advisors BDO LLP revealed business are stockpiling goods, which is driving part of their production. But the report warned exports have been unable to pick up since dropping last year, with Brexit uncertainty throughout Europe continuing to mount. Employment plans have been ramped up, indicating that rather than making long-term investments, manufacturers are opting to hire a flexible workforce in the short-term.
Make UK chief executive Stephen Phipson said: “While it is good news that output remains stable, it is no surprise that all the economic forecasts indicate that this will not last.
“Manufacturing needs certainty over Brexit to boost orders and exports and to protect the jobs of nearly three million people working in the manufacturing sector across the UK.
“Investment cannot recover while uncertainty continues to rule our political landscape. UK manufacturing needs a deal and time is running out.”
BDO head of manufacturing Tom Lawton warned the continued uncertainty surrounding Brexit is heavily impacting growth.
He said: “The deterioration in export balances combined with the ongoing uncertainty and absence of political leadership in the UK is proving to be a real drag on growth.”
But the Government has attempted to paint a brighter picture, stating demand for British products across the world increased 3.3 percent last year to £350million.
A spokesman said: “Leaving the EU with a deal remains the Government’s top priority, and this is the best way to avoid disruption to our global trading relationships.
“Global demand for British products continues to grow and goods exports increased to £350 billion last year, up 3.3 percent on 2017.
“We are continuing to work with industry to promote British exports around the world and to drive investment that creates better, higher paying jobs in every part of the UK.”
The latest warning from manufacturers comes after a survey of the industry revealed optimism about their prospects for the remainder of the year fell to a 27-year low last month amid record stockpiling to cope with potential impacts from a no-deal Brexit.
The IHS Markit/CIP UK manufacturing purchasing managers’ index (PMI), which assesses the level of activity in the sector, fell to a four-month low in February to 52 points – down from a revised reading of 52.6 in January.
This is still above the 50 mark that divides growth from contraction, but activity was only prevented from plummeting further because businesses are hoarding raw materials and working to complete orders before the proposed Brexit date of March 29.
The study also found fears the UK will tumble out of the European Union without a Brexit deal are also forcing manufacturers to cut jobs at the fastest rate since February 2013.
IHS Markit director Rob Dobson said: “With Brexit day looming, UK manufacturers continued to implement plans to mitigate potential disruptions.
“Stockpiling of both inputs and finished products remained the order of the day, with growth in the former hitting a fresh record high.
“The current elevated degree of uncertainty is also having knock-on effects for business confidence and employment, with optimism at its lowest ebb in the survey’s history and the rate of job losses accelerating to a six-year high.”
He added: “Apart from the uncertain outlook, manufacturers also face a darkening backdrop of a domestic market slowdown and weakening inflows of new export business, as global growth decelerates and trade tensions bite.
“Manufacturing and the broader UK economy therefore face a difficult 2019, with the slowdown being exacerbated later in the year as inventory positions are unwound and Brexit-related headwinds likely to linger.”