Manufacturing

Manufacturing is a stoic sector that gets on with the job in hand. But is this a time to be rolling up sleeves, or should the sector be looking more closely at what the future holds?

Our Trade Barometer shows that less than half of manufacturing businesses have put plans in place or made preparations to address the impact of leaving the EU. While this is low compared to other sectors, manufacturers have a more watchful eye on issues such as the rise of protectionism in overseas markets, currency volatility and the threat of interest rate rises.

Some 71% of manufacturing companies trade internationally, and uncertainty around Brexit is still causing some concern according to our statistics:

• 43% of manufacturing companies report that Brexit will have a negative effect on their business.

Terry Scuoler, Santander’s Manufacturing Sector Advisor, issues a word of warning but highlights the opportunities that exist for pro-active businesses:

With the likely agreement of a 21-month transition period delaying Britain’s departure until the end of 2020 there is a risk that companies will lose the sense of urgency needed to adapt to a changing trading environment.

My message therefore to companies is, as ever, that competitiveness is key. Continued investment in modern plant and equipment, improved process flow and up skilling at all levels is vital if companies are to prosper and ultimately for the UK to win the global race.

Santander’s view:

In the post-Brexit world, manufacturing will increasingly provide Britain’s link to the world, currently generating 44% of total UK exports. The sector is also vital for the nation’s future source of income, undertaking some 70% of total R&D by Britain’s businesses.

Data around employment is equally impressive, with 2.6 million people working within the manufacturing sector across the country.

Sources: Santander Trade Barometer Spring 2018 update - EEF and Santander UK Manufacturing 2017/18, The Facts, September 2017 - EEF and Santander Investment Monitor 2017/18, 2017

Transport and logistics

Transport and logistics is a wide-ranging sector and certain firms will be affected to a much greater degree by Brexit – specifically Britain’s exit from the Customs Union. Starting some form of long-term planning is crucial.

Our Trade Barometer survey suggests that less than half (46%) of transport and logistics businesses have started planning for the post-Brexit future. This is broadly in line with the rest of the economy.

Let’s look at those that have started planning.

• 70% have started scenario planning for the potential Brexit outcomes.
• 56% have started investing in solutions to deal with possible disruption.
• 56% are looking at the legal implications of relocating staff from the UK.

We asked Santander UK’s Head of Transport and Logistics, John Simkins what opportunities Brexit could deliver:

The majority of British goods exported into Europe go across the Channel. Brexit could be the opportunity to consider alternative supply chain routes such as rail or alternative shipping routes.

Similarly businesses could look at World Customs Organisation accreditation as an Authorised Economic Operator, and therefore have the potential to get a much easier journey through customs.

Santander’s view:

More than three-quarters of the UK’s transport and logistics businesses are confident they will grow over the next three years – a greater proportion than in any other sector of the British economy. Brexit has led to a falling sterling, which has led to cheaper exports. UK transport and logistics businesses can capitalise on the increases in exports from other businesses.

Sources: Santander Trade Barometer Spring 2018 update - Quarterly Transport Activity Survey, October 2017