UK manufacturers are entering 2018 more optimistic, but are still worried about the risks associated with Brexit and cyber

The industry has entered 2018 more positive and hopeful of a market boost, but still showing concern regarding Brexit and cyber.

A survey by EFF and AIG has found that 40% of manufacturers are planning for growth in their industry this year compared with 19% predicting deterioration. This is the most positive result since 2014.

Sales growth is also expected in the domestic market (62%), non-EU markets (51%) and from EU customers (47%).

But to counteract this positivity, over a quarter (26%) of companies see more risk than opportunities in 2018. This is up from 23% last year.

The most cited regard Brexit as a risk, with the prospect of rising costs and sterling volatility among the highest concerns.

Commenting, EEF 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 amongst 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.”

However, manufacturers have other risks on their radar, including their exposure to cyber breaches, with over six in ten saying that disruption due to a cyber-attack was on their radar for the year ahead.

Simon Gallimore, manufacturing industry UK lead for AIG added:

“A cyber-attack can swiftly interrupt the supply chain, potentially causing severe disruption to manufacturers. As technology and data start to play increasingly critical roles in the industry, companies will inevitably find themselves more vulnerable to cyber breaches.”

The potential risks which Brexit has exacerbated also feature prominently at the forefront of manufacturers’ minds through the survey provide no evidence that companies are, yet, planning to relocate large parts of their operations to the EU or elsewhere.

Whilst 7% of companies are planning to move production to the EU and 6% to a non-EU location, a slightly greater proportion (12%) are planning to move production back to the UK from the EU whilst 22% are planning to step up their investment in the UK.

Major risks highlighted come from the impact of Brexit on exchange rates with 66% of companies seeing this as a risk. The impact on sterling is especially important with 80% of companies viewing more volatility this year.

Other risks associated with Brexit include the potential loss of EU nationals which is seen as a risk by 38% of companies, and any relocation of major customers (31%).