The manufacturing sector is responsible for 14% of UK business investment © Press Association Images
The manufacturing sector is responsible for 14% of UK business investment © Press Association Images

Manufacturers slow investment amid uncertainty

8 November 2016

Spending by manufacturers on plant and machinery is expected to slow over the coming two years, according to research.

Manufacturers' organisation EEF said “elevated levels of uncertainty are clouding the ability of businesses to forecast future demand”, though this was an underlying trend not altered by June’s Brexit vote.

EEF, in its Investment Monitor 2016 report, found three out of five firms intended to slow spending over the next two years, but “while the referendum did not prove to be the trigger for a change in manufacturers’ short-term investment behaviour, that doesn’t mean we are out of the woods just yet”.

The report said events such as triggering article 50, a major OEM making a big investment outside the UK or the Brexit negotiations were “potential trigger points”.

EEF also said the proportion of firms citing political uncertainty as a reason not to invest increased to 25% in August, compared to 6% in March.

And because of the depreciation of the pound manufacturers are considerably more optimistic about their export prospects than they are about the domestic market.

The manufacturing sector is responsible for 14% of all business investment and 67% of business expenditure on research and development in the UK. 

The report said: “A slowdown in investment continues to be the most likely outcome over the next two years, as opposed to an outright collapse in manufacturers’ investment intentions post-referendum.”

In August, after the Brexit vote, survey results revealed that manufacturers were shifting their focus towards investment in intangibles, such as R&D, as opposed to plant and machinery.

“Manufacturers cannot press the pause button on their business until the UK’s future relationship with the EU is sorted out,” the report said.

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