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UK manufacturers reported their sharpest cutbacks in headcount in seven years last month as they struggle to rebuild their operations after the Brexit vote.
Companies cut permanent staff by the biggest margin in two years in November, although the drop in full-time positions overall remained modest, according to the survey from the EEF manufacturers’ organisation.
The employment figures mirror what other surveys have shown for the run-up to the UK’s scheduled exit from the European Union. Manufacturers, many of whom are based in the Brexit-sensitive UK Midlands and the north of England, have long complained about an uncertain economic outlook with house prices frozen, confidence sinking and retailers shutting stores.
Bank of England surveys have shown respondents expecting an increase in business investment next year as Brexit looms. But manufacturers still face questions over whether they can raise prices, or increase their overseas markets, enough to offset the impact of an import-led decline in prices.
Howard Archer, chief economic adviser to the EEF, said the new figures suggest manufacturing’s “grim picture” appears to be worsening in the run-up to Brexit. The survey also shows a decline in export orders – the best indicator of foreign investment as well as exports – for the fourth month running.
“Evidence also suggests that investment and export orders both still face challenging conditions,” said Mr Archer. “The sector is particularly vulnerable to the impact of the Brexit process.”
Companies reported the weakest purchasing manager’s index reading in November since March 2017.
Among manufacturers that have reported to the British Retail Consortium data covering the last 20 years, the broader Nuffield Survey of Manufacturers has historically been the most accurate gauge of industry trends, according to analysts at Redmayne Bentley.
The bulk of survey respondents reported relatively flat orders. Paul Hollingsworth, senior UK economist at Capital Economics, said firms were scaling back their inventory rather than cutting orders, suggesting sentiment was relatively resilient.
“Anecdotal evidence is picking up that some international orders, both from the US and from Asia, are likely to be delayed till after the March exit date,” he said.