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The latest quarterly report from the EEF paints a positive picture of manufacturing in the UK. However, clouds are on the horizon

The latest quarterly report from the EEF, the manufacturers’ organisation, shows a sector in relatively rude health, following two years of uninterrupted growth.

In its latest snapshot on the state of manufacturing in the UK, the EEF suggests that the sector remains ‘in the black’ and says that it’s likely to remain the case throughout the rest of 2018.

The report says that the UK has benefitted from an improving global economy and the electronics sector has been particularly strong, in fact, they describe it as the standout performer this quarter.

According to the EEF, the strength in activity in electronics should not be seen as surprising. It is riding high on a global boom with strong demand, in particular, from Asia and the US.

The strong performance in the survey is backed up by official data (and semiconductor sales), and the EEF is expecting that overall, electronics will expand by a ‘whopping’ 10% this year.

However, this impressive performance is in stark contrast to electronics’ sister sector, electrical equipment, which has had a torrid time - contracting by 5% and 6% over the opening quarters of 2018.

But while the electronics sector may be motoring, the EEF warns that momentum is slowing. Recent figures point to growing weakness, not only in the UK, but across Europe, China and Turkey.

Bosses are said to be increasingly worried by the ongoing trade war between China and the US, which in turn is having an impact on manufacturers in the UK and Europe. UK manufacturers have seen foreign demand decline for the first time in two years, despite Sterling’s ongoing weakness.

If the global ‘boom’ begins to falter UK manufacturers could struggle.

Not only that, with the possibility of a hard Brexit looking more likely, they could also be facing disruption to both their supply chains and future orders, especially if they don’t know what trading rules will look like next year.

Certainty for any business is critical and if the uncertainty around Brexit persists, then that slowdown could trigger further falls in investment and we could see a buoyant sector losing its way.

Neil Tyler

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