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Stronger Cash Flow Could Help Manufacturers Fight Brexit Uncertainty

Optimism in the UK’s manufacturing sector improved in the quarter to June, as orders increased strongly and output growth reached its highest level since December, the CBI said on Wednesday. However, longer-term growth is expected to be “subdued” due to uncertainty and weaker consumer spending power, it added.

Once again Brexit uncertainty is weighing heavily on British businesses, now impacting the strength of the manufacturing industry. Despite showing strong signs of growth, the industry has suffered from the uncertainty surrounding the industry’s prospects, as the country draws closer to the Brexit deadline next year.

According to a survey of 388 manufacturers, 14 out of 17 reported growth, driven mostly by food, drink and tobacco and mechanical engineering. Furthermore, one-third of firms said their total order books were above normal for the period, despite a slowdown earlier in the year.

Nonetheless, these positive levels are being disrupted by a strained business sentiment, where political uncertainty has taken down productivity and profits are diminishing. Any upturn in economic activity is consistently derailed by the slow progress of the trade talks in Brussels.

The manufacturing sector has recovered from bouts of subdued activity, but relationships with international allies remain frustratingly undecided. While the government continues to attempt conciliation with Brussels, businesses can do their best to prepare for any outcome. At the Credit Protection Association, our debt recovery services free up cash flow and provide our Members with the financial stability to fight any downturn or plummets in the trajectory of both economic and political.

Samuel Tombs from Pantheon Macroeconomics insists that the manufacturing sector’s recovery still “has legs,”. However, he said, “investment in the manufacturing sector likely will remain subdued, given that the medium-term outlook remains clouded by Brexit and the threat of a global trade war.

As a result, capacity constraints likely will bite soon, preventing a prolonged period of strong growth in manufacturing output from taking hold.” Forty-three per cent of businesses also reported that the volume of output over the quarter was up, compared to 13 per cent that said it had decreased.

This output growth was broadly in line with expectations, said the CBI, but manufacturers said they anticipated growth to slow slightly over the next three months. Meanwhile, nearly a fifth of the companies surveyed said they expected average selling prices to increase in the coming three months, with only 3 per cent predicting a decline.

“The recovery in orders and a return to bumper growth in production suggests the lull in manufacturing activity may be over,” said Anna Leach, from the CBI. Despite Brexit and international trade tensions, “there is much within the UK’s control that can be acted on now to lift UK productivity, from building a third runway at Heathrow to investing in the skills of the future,” she said.

When Britain decided to leave the European Union, the manufacturing sector was one of the hardest hit. Britain’s image was subsequently impacted by the decision to depart, leaving exports and imports struggling to deal with diminished trade relationships.

While the UK government attempts to reach a trade agreement with Brussels, businesses can prepare for both the possibility of further postponement and also the complete inability to reach a deal at all. Indeed, if no deal with the EU can be reached, import tariffs will increase and households and business finances could be squeezed further. In which case, a refocus on cash flow could drive business finances forward.

At the Credit Protection Association, our debt recovery services free up cash flow and allow our Members to pursue new opportunities, as well as protect the ones they have. Whether our Members are struggling with unemployment, late payment or political uncertainty, recovering extra cash could give the business the necessary boost.