🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Shares

UK factories cut investment plans after Brexit vote - EEF

Published 05/09/2016, 00:17
Updated 05/09/2016, 00:20
© Reuters. A worker attaches a connector to electrical wire on the factory floor of PP Control and Automation near Cannock

By Andy Bruce

LONDON (Reuters) - British manufacturers reined in their investment plans after the Brexit vote in June, according to a survey that showed no immediate big hit due to the referendum but may add to doubts about the long-term health of the economy.

Manufacturing output worsened in the three months to August as domestic orders wilted, reversing an improvement earlier this year, industry association EEF and accountancy firm BDO said.

Still, there was no sign of a sudden drop in activity after the vote to leave the European Union and the plunge in the value of the pound boosted export orders, they said, echoing another upbeat survey of manufacturing output last week.

The Bank of England, which has said it expects to cut interest rates again this year, is likely to view the weaker investment plans by manufacturers as consistent with its expectation that Britain's uncertain future trading ties with the EU will gradually take its toll.

The EEF's gauge of investment plans for the next 12 months slipped a point to -10, its lowest since late 2009.

"While the referendum outcome appears not to have pushed the sector back into recession, the results do not provide confidence that a return to stronger growth is on the cards this year either," said EEF chief economist Lee Hopley.

Last month, the Confederation of British Industry said investment plans by services companies - which account for a far larger chunk of the economy than manufacturers - were at their leanest in more than four years.

Despite the uncertainty, the EEF survey of 450 manufacturers showed they mostly expect output and orders to improve, especially for exports. Employment intentions improved slightly.

EEF also pointed to rising price pressures in factories as the weak pound pushed up the cost of imported goods. Recent surveys of the manufacturing and construction sectors also detected inflation signals related to the fall in sterling.

EEF expects Britain's economic growth to stall in the second half of 2016 and stay weak in 2017. Manufacturing output would rise 0.4 percent this year but contract 0.7 percent next year.

© Reuters. A worker attaches a connector to electrical wire on the factory floor of PP Control and Automation near Cannock

The Markit/CIPS PMI for the services sector, due at 0830 GMT, will provide more information on how Britain's economy has performed over the last month.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.