UK firms believe productivity will increase in 2022 but that Brexit will increase costs

Mon 10 Jan 2022
Posted by: Noelle McElhatton
Trade News

British manufacturers are optimistic that business conditions and productivity will improve in 2022, an industry survey suggests.

Research by trade body Make UK and accountants PwC revealed that nearly three quarters (73%) of manufacturer respondents think conditions for the sector will get better, with 78% foreseeing some increase in productivity in 2022.

However, two thirds said Brexit had hampered their business since Britain left the EU, with staff retention and inflationary cost rises highlighted as challenges.

Stephen Phipson, chief executive of Make UK, said: “It’s testament to the strength of manufacturers that they have emerged from the turbulence of the last couple of years in such a relatively strong position.”

Growth markets

Make UK forecasts that manufacturing will have grown 6.9% in 2021 and predicts growth of 3.3% this year.

With a more positive outlook, some 40% of companies expect increased exports to the US with the EU close behind.

Around a quarter (26%) are looking for export growth in Asia and one in five to the Middle East (21%).

However, 10% of companies believe the EU will decrease as an export destination for GB manufacturers.

Reshore option

With supply chain disruption a challenge for many businesses, more than a third of executives surveyed said they would ‘reshore’ some operations within the next two years, but over half said they did not intend to move production back to the UK.

“It is clear from these figures that Brexit and the global Covid-19 pandemic have had a scarring effect on the mentality of many businesses… [with] ongoing delays and disruptions to their supply chains,” the report said.

Green drive

Manufacturers are also increasing their drive towards ‘net zero’ with nearly half (49%) of companies planning to invest in green technologies or energy efficiency measures in 2022, and a third saying this investment has increased.

Reuters reports that the number of British manufacturers raising prices hit its highest in at least two decades last month, according to a Bank of England survey.

Costs rising 

As covered in the IOE&IT’s Daily Update, companies including Ikea, Greggs and Next are to raise prices due to rising input costs.

According to Politico analysis, the UK has performed less well than EU countries as it struggles with the twin challenges of Brexit and the pandemic.

While EU countries have largely recovered to pre-COVID levels of trade, the UK saw flows in Q3 2021 at their lowest value relative to GDP seen since 2009.

DIT hopes

However, the Department for International Trade said it expects 2022 to be a “five-star year” for the UK’s trade push – due to ongoing negotiations with India, Mexico, Canada and the Gulf, plus the hoped-for accession to the CPTPP trade bloc.

“We have secured over £760 billion worth of trade deals with 70 countries plus the EU,” a spokesperson said.

“In the year ahead our independent trade strategy will ensure that the UK continues to attract valuable financial investment that boosts our world-class exports and brings prosperity to every part of the UK helping to level up the country.”