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Brexit starting to impact on manufacturing confidence

 

The latest North East England Quarterly Economic Survey published today, 12 October 2017 shows a distinct difference in manufacturers’ positive current performance and their confidence in the future, which is down dramatically.

Published by the North East England Chamber of Commerce, the results, the largest independent analysis of business opinions in the region, show key indicators are generally in positive territory. Companies’ sales and orders, in the UK and overseas are growing, with regional firms continuing to perform strongly and showing a substantial increase on this time last year.

The results also show a very different picture in future confidence for the service sector which is still positive compared to the manufacturing views.

John McCabe, Chamber President said: “It is easy to speculate why there is this outlook when in reality there a number of factors that affect business confidence. However, the ongoing uncertainty about our future trading relationship with Europe is clearly inhibiting exporters’ ability to plan ahead.

“The Chamber has been pushing the Government to provide reassurance and clarity to businesses. Regardless of individual perspectives on the referendum and Brexit, it is imperative that our manufacturers are safe in the knowledge they will be able to access all potential markets. If this reassurance is provided, then hopefully the fears expressed in this survey will not come to pass.”

Jonathan Walker, Chamber head of policy and campaigns said: “Perhaps the most striking aspect of this quarter’s results is the dramatic decline in the future turnover, profitably and workforce scores for manufacturing sector, which is in stark contrast to the optimism shown by service sector businesses.

“While the uncertainty over future trade is a likely contributor to this, a more immediate factor is the effect of exchange rate fluctuations. More than two-thirds of our manufacturers see this as a growing concern, while increased competition was the highest overall concern.

“The fieldwork for this survey coincided with a consistent slide in the value of the Pound vs the Euro, which may have fed these concerns, especially for businesses who rely on importing components and products.”

Hexham-based Chamber member Multichem exports 99% of its products worldwide; sales into office stationary, arts and crafts sectors have increased over 20% in the last 12 months.

Managing director, Michael Nelson said: “We are finding exchange rates, due to the Brexit situation, are affecting our business at present. Our raw materials are imported and there can be price differentiations with the exchange rates changing.

“On the other hand, some of our customers watch these rates and ask for a price improvement if they see we are benefiting from any fluctuation. There are however, businesses who do understand the situation we find ourselves in at present and are working with us to achieve both price and cash flow stability.”

“Multichem started in 1973 and began to export in the 1980s. We still have long-standing clients from those early days. Our plan is to expand despite these issues and are now in 40 countries and are adding new locations all the time, the most recent being Myanmar.”

Paul Bury managing partner of Stockton-based Endeavour Partnership LLP, a regional business law firm based in Tees Valley said: “We agree with these results. Our success reflects the success of many other businesses in the Tees Valley who export their goods and services throughout the UK and to other parts of the world.

“We are in the fourth year of our five year business plan and are 12 months ahead of our target to double our turnover during this period. This has been achieved by attracting the best legal talent to Endeavour Partnership and delivering high quality legal services to clients wherever they are based.

We are widely regarded as a leading regional law firm that is proud to be based in the Tees Valley.”

Endeavour Partnership employs a team of 54 and has a reputation for providing high quality advice on a range of business law matters including mergers and acquisitions, intellectual property, employment, commercial property and corporate recovery and insolvency from its headquarters at Teesdale in Stockton.