Brexit challenges will materialise after six months

18-Jul-2016 - Last updated on 20-Jul-2016 at 10:12 GMT

The Brexit challenges will become more severe after six months

The challenges of Brexit will be at their most severe for manufacturers – including food and drink producers – over the next six months to a year, culminating in a recession until at least the end of 2017, warns a new survey by the manufacturers’ organisation, EEF.

Ceo of EEF Terry Scuoler said: “Rather than an immediate storm, it is clear that manufacturers see the real risks from the referendum outcome presenting over the next six months to a year.

“While many are acutely aware that we are still in the early days, exchange rate volatility, political uncertainty and the danger of increased costs are already on their risk radar and subsequently we can already see confidence starting to drain away.”

‘Confidence starting to drain away’

Of the 410 senior manufacturing decision makers that completed the survey, 80% said their order intake had largely unchanged since the Brexit vote.

When asked about predicted demand for their products over the next six months, 29% of respondents said they expected fewer orders.

The results also showed a significant dip in confidence for the next 12 months. 75% of respondents said they were concerned about exchange rate volatility during the coming year. Almost half predicted a lower demand for their products.

Manufacturer’s risk radar

Reduced demand
Political uncertainty
Increased costs
Exchange rate volatility

Just 5% of respondents said they found no cause for concern over the next 12 months.

Based on the risks and challenges of Brexit, 58% of businesses planned to review recruitment. 57% will reconsider investment. Almost one-in-five businesses planned to review their recruitment and investment immediately.

‘Recession until at least end of 2017’

Based on these reviews, Scuoler said the industry would suffer further down the line.

“All of our forecasts now point to our sector remaining in recession until at least the end of 2017,” said Scuoler.

“This means that, more than ever, we need government to keep a firm and steady hand on the tiller. This means providing a stable business environment, scrapping burdensome policies and planned levies that add to our costs and reinstating a long-term national industrial strategy.

“The government cannot wipe away the risks that Brexit will cause, but it can provide manufacturers with the reassurance and confidence to invest and seek growth from Brexit’s opportunities.”

Meanwhile, in the Food Manufacture Group recent survey of industry worries and expectations, 60% of businesses said a vote to leave the EU would be bad for their business.

More than half of businesses also planned more capital investment over the next 12 months than the previous year.