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Fall in UK manufacturing activity
Archived article dated Friday October 9th 2009
Following research from the manufacturing Purchasing Managers' Index (PMI) indicating that the British manufacturing sector shrank for the second month in a row in September, Robin Johnson, partner at international law firm Eversheds comments:
“There is no question that the recovery from the recession is going to be slow in the manufacturing sector, both in Europe and more globally. However, notwithstanding the PMI survey, surveys coming out of the US, particularly from the National Electronic Manufacturers Association and the Manufacturers Alliance Network indicate a growing confidence from major US based global manufacturing businesses.There is a potential lack of confidence particularly from the States in relation to the UK economy, but I believe this is just a temporary blip. Uncertainty comes around increase in personal tax rates, currency fluctuations, long term customers counterparty risk and confidence in government strategy and the perceived lack of that support for manufacturing from the UK.
“When the recovery comes back, it is clear that a number of global businesses have re-thought their strategy in terms of manufacturing. Logistic costs from Asia have proved to be prohibitive in terms of moving business to so-called low cost manufacturing centres and will see three centres of excellent being created; one where US manufacturing sites will service the north American market; sites in Europe which will service the European market and sites in Asia which will service the Asian market.
“People have long argued that there may be some merits in the UK joining the Euro to take away currency risk and tax incentives being offered particularly in Switzerland for moving businesses to Switzerland is high up the political agenda. Nevertheless, the perceived more relaxed labour market in the UK is a strong positive for the UK in attracting business from the States and while Germany and France may temporarily be looking to be ahead of the UK. In terms of manufacturing output in the long run, I would expect the UK to significantly power ahead of France and Germany as the recovery takes hold.”
For further information please contact robinjohnson@eversheds.com
Tagged as: manufacturing | eversheds
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