A survey of North East businesses has shown that manufacturing exporters are enjoying strong sales and orders in foreign markets, and are also reporting improvements in domestic sales and orders.
The report shows a small increase of 0.5 in exporting confidence this quarter, based on the BCC/DHL Trade Confidence Index.
Jack Simpson, policy adviser, North East England Chamber of Commerce said: “It is positive news that many exporters are confident about their businesses and have a strong order book. However it is a concern that a number are not preparing for Brexit and the potential impact on their businesses.
Most exporters believed their prices had remained at a constant this quarter, but more reported a rise in their export prices than a decline. 43% listed demand increase as the primary factor for future export strategy.
Similarly, most importers believed their prices have remained constant, but a wider margin believed their price had increased than decreased. 44% of importers believe the exchange rate will be the biggest influence on their import strategy.
With regard to Brexit, there are concerns that changes to regulations and data protection rules will negatively affect businesses, while 25% of businesses identified a Brexit issue they were sensitive to, but were not planning a solution.
Jack Simpson said: “The Chamber is currently working with Square One Law on a project to help prepare supply chain manufacturers for the impact of leaving the EU and this research backs up the urgent need for this support.”
Despite the positive growth of exporters, most responders believe that their cost base will increase of the next 12-months due to the valuation of the pound. Despite this, 52% of responders are making no attempt to manage currency risk. In concurrence with the BCC report, this is because many exporters have been able to offset the fall in sterling thanks to timely improvements in sales and orders.
Key findings from the survey:
- The BCC/DHL Trade Confidence Index, a measure of the volume of trade documentation issued nationally, rose by 0.5 in Q3 for the North East. Nationally, the Index is at 126.51 – up 4% from this point last year.
- A high of 19% saw an increase in export prices to Western Europe, while a high of 12% felt a decrease in the same region. Exporters to Latin America had the most beneficial range of of 8% (12% price increase, 4% price decrease).
- 43% believe increased demand is the primary factor influencing their future export strategy, closely followed by the UK-EU relationship at 41%.
- 50% of exporters believe that tariffs will be the most significant barrier to trade, while 44% believed that it will be Custom Procedures.
- More importers from Western Europe reported a price increase of 22%, and only 5% reported decrease (17% range). Only in Asia (exc. China & India) did a larger share of importers note a price decrease rather than increase.
- Most manufacturers believed they were not sensitive to Brexit, but a worrying average of 29% believed that their business was sensitive to Brexit, but NOT planning for it.
- In the wake of Brexit 57% believe they are most sensitive to regulation changes and 49% changes to IT and data protection.
- 59% of manufactures expect their cost base to increase, due to the valuation of the sterling. Up 7% from 2016, this represents a growing concern across North East manufacturers.