Brutal start to 2021 for East’s manufacturers

The production line at the Aspall factory near Debenham in Suffolk

East of England manufacturing has endured a brutal start to 2021 according to Make UK - Credit: RACHEL EDGE

The closure of hospitality businesses has meant East of England manufacturers have begun the new year painfully, a major survey suggests.

A study by manufacturers’ group Make UK and accountants BDO reveals the “brutal” impact of the coronavirus pandemic on the sector, which saw a dramatic 10% drop in output last year.

In the first quarter of this year, the East of England saw a slow start — although the picture is expected to improve as the year progresses, says Make UK, which has upgraded its growth forecasts for manufacturers over 2021.

Output in the East of England dropped in the first part of 2021 compared to the last quarter of 2020, the survey found.

Both UK and export orders took a hit, possibly as a result of the continued closure of the hospitality sector. The East of England has a high exposure to the food and drink sector which is one of its manufacturing mainstays.

As a result of the difficult trading conditions, recruitment and investment intentions remain in negative territory.

Make UK warned that ongoing difficulties for exporters to the European Union continued to be the main drag on business activity and is urging government to work with industry to tackle red tape and other border-related issues.

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But the organisation has upgraded its forecasts for manufacturing growth this year to 3.9% — up from 2.7% at the end of 2020 as conditions improve.

Make UK East of England director Charlotte Horobin said: “After the seismic shock to the sector last year, manufacturers in the East of England are seeing a slow road to recovery, especially given the impact of the continued closure of the hospitality sector. The major cloud on the horizon, however, remains the transition to new trading arrangements with the EU which go beyond ‘teething troubles’.

“Government must recognise this and work with Industry and the EU to smooth these problems out, or the problems we are seeing now will become structural and permanent. This will have long-term consequences for exporters who will lose business and importers who will choose to give up on the UK market altogether.”

Keith Ferguson, head of manufacturing at BDO in East Anglia, said what the region’s manufacturers really need is certainty over the longer term to allow the sector to invest with confidence as the industry faces a “critical” few months. 

“With investment intentions among manufacturers in East Anglia remaining in negative territory, the Chancellor’s recently announced super-deduction tax incentive presents a real opportunity for those firms with access to finance to bring forward investment plans into the qualifying period and boost their productivity. However, the proposed two year window is arguably too short,” he said.

“While the results of this quarter’s survey are in some ways encouraging, the next six to nine months will nevertheless be critical for those manufacturers facing financial distress. 

“Many will have deferred tax payments and taken on additional loans to help them through the crisis. The recently announced extension of the furlough scheme and other support measures will help in the short term, however, many will need to use this time to plan and implement turnaround strategies - and in certain cases take some tough decisions.”