Brexit uncertainty hampers exports and investment

13 Apr 2017

Business Featured

As the UK prepares to negotiate its exit from the European Union, UK businesses will be considering how the new political landscape will affect their ability to trade in Europe and globally.

Some firms will be relieved that they can now get on with business, whilst others are concerned that nobody knows how the UK’s relationship with Europe will shape up following Brexit.

The quarterly economic survey findings for St Helens for the first quarter of 2017 were mixed, and for manufacturing respondents, investment intentions and export trade have fallen sharply.

Following four quarters of positive growth in export markets, manufacturing firms recorded falls in both sales and future order books this quarter. Likewise investment intentions have plummeted for manufacturers, following five quarters of strong growth.

Domestic growth remains moderate in both manufacturing and service sectors, although future orders have fallen compared to the last quarter of 2016.

Businesses also continue to report that the rising cost of raw materials are squeezing margins, forcing many firms to raise their prices and inflation is feeding through to further wage demands.

While the government has little direct influence on currency movements or global commodity prices, it must do more to ease the burden of up-front costs and taxes faced by businesses.

Tracy Mawson, Deputy Chief Executive at St Helens Chamber, comments: “Now that Brexit negotiations are set to begin, businesses across the UK and their trading partners in Europe, want answers to practical questions, not political posturing.

“A pragmatic and grown-up dialogue on the real-world issues, rather than verbal volleys between London and Brussels, would give firms greater confidence over the next two years.

“Many companies have been adopting a ‘business as usual’ approach since the country voted to leave, which has kept conditions buoyant in 2016 and prevented a sharp slowdown in growth. Yet with several years of unspectacular growth ahead, coupled with inflationary pressures, it has never been more important to tackle the long-standing constraints that limit business confidence and growth here at home.

“However, the government has introduced a raft of changes in the new tax year, adding to the upfront cost of doing business. Whilst firms welcome the reductions in corporation tax, companies are more concerned about the escalating burden of employment and input costs which hit firms before they even turn over a single pound.

“Such costs are likely to cause many firms to implement cost reduction measures and weigh down on firms’ ability to invest, recruit and grow their business.

“We are calling for the Prime Minister and her government to remember Brexit is not the only thing on the minds of UK businesses. Issues here at home, from the training system to sky-high business rates and investment in infrastructure, still need to be addressed. Businesses would not look kindly on a government that treats Brexit as its only job. Getting the fundamentals right here in the UK is as important, if not more important, than any eventual Brexit deal.”

To view the full results of the St Helens Quarterly Economic Survey click here.