The country’s decision to leave the European Union affected the manufacturing industry dramatically. Demand for British goods has subsequently diminished, a negative sentiment bolstered by the industry’s fears concerning free trade. Even the largest and most prominent manufacturers within the UK have expressed a desire to decamp elsewhere if free trade is in fact abolished. Since the referendum, export demand has increased, but business sentiment has not.
According to the IHS Markit and CIPS UK survey, the manufacturing sector delivered a disappointing performance in July, falling short of expectations. The Manufacturing Purchasing Manager’s Index (PMI), a measure of business confidence, also dropped below the reading in June and generated concern for the industry’s prospects.
The political landscape has become governed by uncertainty and the economy has not fared better. Business confidence in the sector has dropped to a 21-month low, with business owners and their employees struggling to navigate the unsettled business landscape.
An upturn in exports has provided the sector with some respite, with demand increasing at its fastest rate in six months. Domestic demand slumped, however, with car production suffering a severe slowdown. The overall picture is uneven at best, and pessimistic at worst.
The Bank of England’s recent decision to hike interest rates to 0.75 will further aggravate business confidence, with many firms fearing their access to finance ruptured. The easiest way to improve prospects is to increase focus on creditworthiness. Businesses must improve their credit rating, reduce the risk of late payment and generally create a more stable financial environment.