EEF warns Brexit vote will leave manufacturing sector in recession until 2017

Jessica Morris
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Behind The Scenes At The Bristol Airbus Factory
British manufacturers see dark clouds gathering on the horizon (Source: Getty)

EEF issued a stark warning about the impact of the Brexit vote on Britain's manufacturers today, as its forecasts now suggest the sector will stay in recession until 2017.

The industry body predicts it will shrink by 0.3 per cent this year, and 1.1 per cent in 2017. This compares to previous predictions for it to remain flat in 2016, before growing 1.2 per cent a year later.

Read more: Manufacturing was on the mend before EU referendum

"This means that, more than ever, we need government to keep a firm and steady hand on the tiller," Terry Scuoler, chief executive of EEF, said.

EEF's quarterly manufacturing outlook also showed firms had so far shrugged off uncertainty following the referendum outcome. Nevertheless dark clouds are gathering on the horizon.

More than 80 per cent of manufacturers reported that their order intake was unchanged after the Brexit vote, or it's too soon to say what the impact has been. Seven per cent said UK orders fell, and eight per cent reported lower EU orders.

But 29 per cent said they expect orders to decline in the next six months. Similarly, confidence for the 12 months ahead has tumbled, with three quarters of manufacturers concerned about exchange rate volatility.

Read more: Manufacturing output smashes expectations to defy Brexit slowdown

While the weak pound will boost demand for British goods by making them cheaper for foreign buyers, manufacturers could suffer higher production costs as imported goods become more expensive.

Terry Scuoler, chief executive of EEF, 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."

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