British Retail Consortium and Make UK have issued stark warnings of a faltering economy especially if the UK leaves the bloc without a deal at the end of October.
On June 4, 2019, the BRC (British Retail Consortium) reported that total sales figures fell by 2.7 percent and like-for-like sales dropped by 3 percent and holds the Brexit confusion responsible for the unprecedented drop in sales figures.
The BRC’s CEO Helen Dickinson gave the following remarks:
“With the biggest decline in retail sales on record, the risk of further job losses and store closures will only increase. While May 2018 offered almost unbroken sunshine, topped off by the run-up to the World Cup and the marriage of Meghan and Harry, May 2019 delivered political and economic uncertainty. Food sales dropped for the first time since June 2016, with further declines in clothing, footwear and outdoor goods.“
“With retail conditions the toughest they have been for a decade; politicians must act to support the successful reinvention of our high streets and local communities. Business rates remain a barrier, preventing many retailers from investing in their physical space. We have a broken tax system, which sees retailers paying vast sums of money regardless of whether they make a penny at the till, and yet the Government is failing to act. The legislation is falling behind the technological revolution.”
Taken from brc.org.uk.
With the unpredictability of Brexit impacting both the British retail and manufacturing industries, the 3 percent drop in sales figures as reported by the British Retail Consortium, signals the worst performance since 1995 when the trade association started its monthly reports.
Over the last quarter, the UK economy has been propped up by consumer spending, with official reports showing better than expected figures. Dickinson also hinted at the threat from the ‘technological revolution’ that the retail industry faces as more and more transactions and sales were made online.
The bleak BRC report on the retail sector comes after a gloomy outlook on the condition of the manufacturing industry by the Chartered Institute of Procurement and Supply, which showed the lowest output since the Brexit referendum vote 3 years ago.
As the initial 29th of March Brexit deadline approached many companies rushed to stock up on supplies in efforts to minimize any disruption that would have ensued from a no-deal Brexit; however, seeing as the deadline was extended demand from abroad and within the country declined which has resulted in a wavering manufacturing industry.
The PMI (Purchasing Managers’ index) dropped to 49.4 from 53.1 of the previous month demonstrating that UK manufacturing has begun a period of regression. The purchasing managers’ index is a crucial economic indicator that investors pay close attention to because it often provides insights into how GDP is performing. Similarly, the bloc’s manufacturing sectors have seen a drop in production from April’s 47.9 to May’s 47.7.
As found in the survey made by the global information provider, IHS Markit, the suspended Brexit deadline had cut orders from abroad as well as within the UK. How Brexit will conclude is still very much shrouded by doubt and uncertainty; with this in mind it either forces businesses to implement contingency plans or to relocate their suppliers outside Britain. Feeble production figures in the manufacturing sector and weak sales figures in the retail sector have led to another month of job cuts.
HIS Markit director Rob Dobson, said: “The UK manufacturing sector was buffeted by ongoing Brexit uncertainty again in May. The trend in output weakened and, based on its relationship with official ONS data, is pointing to a renewed downturn of production.”
According to the UK based accounting firm, Ernst and Young, in 2018 Britain was Europe’s most popular place for foreign direct investments (FDIs). Around 15 percent of foreign investors have suspended any intentions to invest in Britain because of tensions surrounding Brexit, nevertheless, only a small percentage of those investors had considered removing their assets completely from the UK. Foreign direct investment in UK manufacturing fell by 35 percent last year.
On June 3rd, The Manufacturers’ Organization Make UK said that a no-deal Brexit was ‘economic lunacy’ and that it ‘must be avoided at all costs’. Especially with the surveys showing that production figures are declining rapidly, reinforcing the warnings from Britain’s manufacturing sector that a no-deal Brexit could wreak havoc on the economy.
- Domestic and export orders continue to weaken
- Gap between output and orders increased
- Export orders remain at weakest levels since referendum
- Growing evidence of European customers abandoning UK supply chains
- Investment intentions paralysed
- Manufacturing forecast to grow just 0.2% in 2019, 0.8% in 2020
Taken from makeuk.org.
Hiring and investing in the UK’s manufacturing sector has been crippled with a mere 6 percent of manufacturers increasing their investments and hiring fell by 10 percent. Britain’s manufacturing industry was briefly elevated as businesses made desperate attempts, through contingency plans, to stockpile in advance in order to counter any disruptions that could have resulted from delays at border customs.
Make UK’s Chief Economist, Seamus Nevin commented on the current situation by saying:
“Whilst the data at first glance makes for reassuring reading there is a clear weakening trend which, if it continues, would push some elements of industry over the edge before too long.”
“Earlier this year there was clear evidence that industry was on steroids as companies stockpiled. Underneath, however, there is now growing evidence of European companies abandoning UK supply chains, whilst Asian customers balk at the unknown of what may exist as the UK leaves trade agreements which operate under EU rules.”
“With this picture it would be the height of economic lunacy to take the UK out of the EU with no deal in place. The race to the bottom in the interests of party ideology has to stop otherwise there will be a heavy price to pay.”
Phillip Hammond, Chancellor of the Exchequer said that the economy shows signs of being ‘robust’ with nearly a decade of consecutive economic growth, and that ‘of course there is an element of stock building in the quarterly figures that we’ve seen today but these quarterly figures far exceed the expectation on the annual growth prediction.’
Quotation taken from bbc.com.
Settling the unpredictability that surrounds Brexit could be the catalyst for long term investments that the UK’s economy requires to reverse its recent downward trend.
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