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Uncertainty was always going to be a buzzword for 2016, regardless of the outcome of the referendum, but the manufacturing sector has continued to demonstrate its resilience and optimism.

The recent headlines were littered with reports that, in the aftermath of the vote, the Markit UK Manufacturing PMI dropped to a 41-month low of 48.3, signalling contraction in the sector. The pessimism was short-lived, however, and with the dust still settling the PMI recovered to 53.3 in August, indicating renewed optimism from the sector that manufacturing would prevail irrespective of the vote to leave the EU that many manufacturers feared. This record increase in the index, followed by even more positive September figures, coincided with manufacturers reporting an increase in output, new orders and solid inflows of new work. The manufacturing sector bounced back.

The automotive industry is arguably one of those most exposed to Brexit, yet the after-effects, if they are to come at all, haven’t been felt yet. In August, the Society of Motor Manufacturers and Traders reported a 9.1% year-on-year rise in vehicle manufacturing output which lifted output to a 14-year high, driven up predominantly by an increase in exports of 13.3%. It is probably too early to pin this on the increased affordability of UK exports, although it certainly had a part to play. It is just as likely to be, as Mike Hawes of the Society of Motor Manufacturers and Traders commented, a function of the huge investment in UK plants such as Nissan’s huge Sunderland plant, where over 500,000 cars are assembled each year.

That very plant, Britain’s largest, is however under threat in a post-EU Britain and its chief executive has repeatedly stated the importance – in tandem with many other sector leaders – of not only a quick resolution to Britain’s ongoing trading relationship with Europe but compensation for companies hit by tariffs which might be imposed on them. The risk of tariffed international trade reinforces how important the roles of David Davis, Philip Hammond and Theresa May will be in securing a prosperous post-EU future for Britain.

Throughout the turbulent months before and after the vote, it was encouraging to note that the sector, despite its huge reliance on import and export markets, remained more upbeat than the services sector, with consistently higher PMI figures being posted in June, July, August and September. As if further evidence is needed, those figures are indicative of a strong UK manufacturing sector which has, time and time again, prevailed in the face of adversity and demonstrated resilience unmatched either by other sectors in the UK or the manufacturing sector internationally.

There is no question that the impact of the vote has not yet unravelled and the aftershocks will be felt for at least the next three years – and possibly much longer – as the government tries to navigate its exit from the EU and its entry into any number of trade deals intended to fill the void created by tariff free access to the world’s largest single market.

The manufacturing sector will again be expected to rise to the challenge of weathering the storm and embrace the opportunities posed by Brexit. Early indications are encouraging.

 

Closer to home

It has been a time of change for Irwin Mitchell too, with 2016 seeing the completion of our merger with Thomas Eggar and the creation of our wealth management division, Irwin Mitchell Private Wealth. Both of these developments significantly enhance the full-service offering we provide to our clients, by expanding our geographical reach and your access to our sector expertise, as well as bringing you additional services to ensure that we are able to meet the every need of you and your business. We am particular proud to introduce members of the wider team to you in this and future editions of Focus on Manufacturing.

 

We have no doubt that, for Irwin Mitchell, it will be business as usual, and we will continue to focus on delivering expert legal services to you to support you in dealing with the opportunities and challenges posed by developments in the sector, be they Brexit related or otherwise. We’ll be on hand to help.