The North East manufacturing sector has ended the year with news that production is on the increase, despite the toll of political uncertainty that a no-deal Brexit could bring.
This is according to a major Temperature Check survey of manufacturers across a broad spread of businesses, released by the MHA Association.
“Manufacturing is one of the mainstays of the economy in the North East and so the feedback received from businesses provides a good insight as to how the economy is feeling and responding to the challenges that the Coronavirus pandemic has created,” said Alastair Wilson, a Tax Partner at MHA Tait Walker.
Companies responding to the survey included those across the aerospace, fast-moving consumer goods, oil and gas engineering and pharmaceutical sectors among others.
The survey shows companies believe it will take between six and 24 months to recover to pre-Covid-19 levels. A small number of interviewees said they had already recovered.
Most of North East companies interviewed said they were still planning investment on roughly the same timescale or with slightly elongated timescales as a result of the disruption.
In some instances, businesses were investing less than originally planned, but the survey has shown an equal number investing more than originally planned.
A common reason for increased investment tended to be that the businesses were having to change their product mix as a result of has been experienced in the marketplace.
Alastair added that manufacturers in the North East had responded to the challenges in 2020 quickly, but had also responded to opportunities too.
He commented: “We have in the region seen manufacturers move to support manufacturing for the NHS (for example supporting the ventilator projects) that might previously have been manufacturing for the automotive sector. Equally we have seen businesses capitalise on new opportunities.
“For example, one of the businesses that we act for has been very successful in making perspex screens for a broad range of customers and that was not a significant product for the company prior to Coronavirus.”
Respondents to the survey were mixed in their approach to supply chain, with almost half (47%) saying they would have to change their supply chain quite a lot, versus a combined majority of 27% and 21% who said they won’t change at all or very little with the remaining 5% seeing significant change.
The survey comes on the back of the combined financial implications of Brexit and Coronavirus, which together are now causing some businesses to reassess whether long distance supply chains are as effective as they would have been prior to the combination of coronavirus and the impending end of the Brexit transition.
Overall, those interviewed believed the Government had provided roughly about the right level of support for manufacturing in the North East, and that it had been fast and comprehensive.
However, Alastair said the looming disruption that the end of the Brexit transition period might bring ‘an unwanted headache to what has been a difficult year.’
He pointed to the work MHA Tait Walker has done with local manufacturing support body, The Advanced Manufacturing Forum.
Arthur Hodgson of The Advanced Manufacturing Forum, commented: “It is testament to the ability of the region’s manufacturers and survey respondents, many of whom are members of the Advanced Manufacturing Forum, that many have recovered to near pre-Coronavirus levels or have adapted to provide new products and have turned the challenge into an opportunity.”
Alastair added: “The North East region is a big net exporter, in particular of motor vehicles, and the impact of Coronavirus and then the risk of tariffs on cars under Brexit have meant that the automotive sector has had a particularly challenging year ahead.
“A trade deal with the EU would be the best outcome now as it would make it more likely that there will be less ongoing disruption for this vital sector in 2021.”
View the results of the survey here:
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