December Performance of the Manufacturing Sector in NI
Annual external and export sales figures have shown that despite wider uncertainty, our firms are proving that when the opportunity presents itself, the sector is more than able to grasp it.
The annual Broad Economy Sales and Exports Statistics report for the 2016-17 recorded a total sales increase of £1.8 billion. This was largely driven by increasing sales within NI, up some £829 million with GB sales up £281 million and exports up £686 million, some 7.3%.
Sales to Republic of Ireland have turned positive with an increase of 2.2% and represents just over one third of our export sales. Sales to the rest of the EU increased also by 9.4% over while sales to the rest of the world increased by 10.4%. Sales to GB rose by 2% to £14 billion, some 20.3 % of total sales.
Thanks largely to the sudden devaluation in Sterling after the EU Referendum, our firms have been quick at securing new export markets and fulfilling orders at home and in GB as customers switched to import substitution.
Now should be the perfect time to invest for the future. However, beneath the record annual export numbers hides a story of uncertainty and risk which makes this success insecure but our firms know well that you can’t build a business on the vagaries of the currency exchange, particularly as most have a profit margin of less than 10% with agri-food businesses closer to 2%.
Indeed, provisional results for Q3 2017 from the Department of the Economy’s report last week showed significant headwinds with manufacturing output falling by 3.6% over the quarter and by 6.5% over the year. Four of six manufacturing subsectors saw a decrease in their output, with the Food, Beverages and Tobacco sub sector recording a substantial decline of 18.1%.
And, when we surveyed manufacturers at the beginning of December, 38% said they are planning on shifting production outside of the UK by developing their own facilities, making a purchase of creating new partnerships inside the EU.
Elsewhere in our survey, 3 out of 4 manufacturers said that Brexit will be negative to their business regardless of a good, bad or no deal outcome. With only 16% saying they thought it would be positive and one in ten believing it will have no impact, it is clear that efforts to convince business that the UK outside of the EU will prosper have, so far, failed.
Given events, a bespoke Manufacturing Plan, delivered by a local Economy Minister is now, more than ever, needed. Focusing on building a competitive, skilled, innovative sector with a target of 20% of local GDP will bring some certainty in an uncertain world.
A credible plan that also ensures there is no barriers to trade across or between these islands is needed. Three quarters of manufacturers have no experience of tariffs and non-tariff barriers such as rules of origin, tariff limits and freight forwarding so it is essential to focus on a way which ensure there will be no delays, hindrances, costs or over-burdening complexity which would threaten the future of businesses and jobs.
There is a way in which we can be a full participant in both the EU and the UK markets, with all the benefits of both – effectively the bridge rather than the border between the UK and the EU post-Brexit. This could be transformative for our economy positioning Northern Ireland as one of the most attractive regions in the world in which to invest and create thousands of jobs.
Our employers need to be prepared and take action and so too must Government, we really need our Executive back to make informed decisions and investments in infrastructure and skills to benefit the local economy. Local people taking decisions which deliver effective and efficient services instead of lumping an additional cost burden onto businesses and citizens.
When the winds are blowing in their favour, our manufacturing leaders have demonstrated they capable of making the best of it. We need more of those favourable conditions in 2018 and beyond. There is an opportunity to reindustrialise Northern Ireland and we know that when manufacturing grows, the whole economy grows with it. That’s a hugely attractive outcome, but are we willing to grasp this opportunity?
Only we have the chance to have our cake and eat it. With leadership in place, we could make the cake too!