EIA President, Sir Ron Halstead, attended a Bank of England meeting on 28 September 2017 and presented the results of their recent survey among SMEs in Engineering. In comparison with the last survey of 23 March 2016 the following trends are apparent:
- Business Confidence has not improved and is approximately the same as last time
- Overall Growth showed no improvement
- UK Demand is the same as last time
- Export demand is still strong but no improvement on last time
- The number of people employed is mostly static
- The average increase in pay per employee is mainly in the 0-2% area
- There are still skill shortages
- 50% of survey will increase prices compared with 60% last time
- Investment intentions are marginally down compared with last time
The factors influencing the results include the following:
- The significant decline in Sterling is still helping exports. At the last meeting Sir Ron Halstead mentioned problems with DIT on the delays on agreeing the programme for overseas shows under the TAP programme. The programme has now been agreed for this year but we are now awaiting information and agreement on next year’s programme.
- The main concern amongst members is the uncertainty of Brexit. This is affecting their future planning and investment. Many companies are fearful of the effect on their business and their ability to trade in Europe.
Many of these points are reflected in the member comments, some of which are as follows:
"Ongoing uncertainty from within the UK government over their stance for Brexit negotiations and a possible transitional period are having a serious effect on company’s ability to plan for the next five years. We need clarity, even if we don't agree with it!"
"It seems that everyone is waiting for the parameters of Brexit, with a consequence that companies are holding back from investment. Whilst it would appear that this situation is not going to resolve itself for another 18 months we can only see the UK economy moving towards recession, with this in mind we will concentrate our efforts on exports."
"Growth is expected to be stronger due to our own efforts & brand promotion. Finance would still be an issue if we sort it due to existing circumstances. Skills have not been an issue as we ‘grow our own’ employing 4 apprentices in 5 years. Price rises will be resisted both in UK due to high costs of employment for clients and in export due to the sterling levels against euro. Rise in auto-enrolment in April 2018 & April 2019 (Doubling minimum contribution in 2018 & then another 1% rise in 2019) will hit smaller employers significantly especially added to National Living Wage. Changes to training funding and employer contributions will affect smaller companies."
"The weak pound is increasing export demand from Europe as it makes us more competitive against our European wide competitors. I don’t expect this situation to continue once Brexit actually happens."
"Our market reacts slowly to economic events due to the long term nature of our customers’ investment plans and the long period required to fulfil our machinery projects. We are still busy as a result of last year’s exchange rate changes, as we received orders on prices based on pre Brexit costs. However we suffered some serious input cost increases during the fulfilment of these orders, which will make us increase our prices for ongoing business. This may negate any price advantage we had going forward. Also, we are seeing a slow up in enquiries from UK businesses which we expect to work into lower orders from UK in the next one – two years. Although current activity remains high, there is uncertainty of what the economy will be at in a couple of years’ time. This affects our investment plans."
"Overall we expect a good 2017 & 2018, our group has transferred production from US TO UK which helps increase our production and lead times."