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91% of UK manufacturers have investigated the impact of Brexit
on their business operations…
…compared with 67% of service providers
Producers in Ireland and Germany score highly on our measure of
Brexit preparedness
Brexit impact assessments lowest among Italian goods
producers
Majority of services firms across big-four eurozone nations
report Brexit preparation as not applicable to their
operations
The latest IHS Markit Business Outlook survey asked
manufacturers and services providers across Europe about their
preparations or plans to address the impact of Brexit. In addition
to UK private sector firms, a high proportion of companies in
Ireland and Germany have either a written plan in place or started
to assess the impact of Brexit on their operations. In France,
Italy and Spain, the majority of firms considered Brexit
preparations as not applicable to their business operations.
Brexit Preparedness - Manufacturing
Just over one-third of UK manufacturers (35%) indicated that
they have written a formal plan for Brexit and a further 55% have
made some investigation but no written plan. As a result, the
survey revealed that the vast majority of UK manufacturers (91%)
have investigated the impact of Brexit on their business operations
to some extent.
Comments from goods producers exposed widespread frustration at
the difficulty of formulating plans given the uncertain outcome of
Brexit negotiations. A broad range of views were cited in relation
to the likelihood of 'no-deal' disruption to business operations,
with some noting that price volatility is the main concern and a
sizeable minority expressing hopes that any supply chain issues
would only prove temporary. However, several firms cited plans to
mitigate against transport delays by building safety stocks and
bringing forward purchases where possible.
Manufacturers in Ireland (77%) and Germany (68%) also scored
highly with regard to Brexit preparedness. Some Irish producers
reported that European alternatives had been sourced to replace
British suppliers, while others noted worries about the impact on
the domestic economy. A number of Irish manufacturers showed
concerns about the unknown costs of transportation, additional
administrative burdens and tariffs, highlighting complications in
planning for the unknown. In Germany, producers indicated the
stockpiling of UK goods and efforts to search for new
suppliers.
Brexit impact assessments were lowest among Italian goods
producers (14%), followed by those in Greece (16%) and Poland
(18%).
The highest proportion of manufacturers considering Brexit
preparations as not applicable to their business operations was
seen in Poland (66%), with some firms indicating that low trade
volumes with the UK meant that detailed plans were not needed. The
lowest figures for Brexit planning being 'not applicable' were
registered in the UK manufacturing sector (4%), Ireland (5%) and
Germany (28%).
Brexit Preparedness - Services
Around 18% of UK services firms reported that they had written a
formal plan for Brexit and a further 49% had started some
investigation, meaning a total of two-thirds of UK service
providers (67%) have evaluated the impact of Brexit on their
business operations.
There were reports of negotiations with vendors to ensure a
steady supply of materials and plans to mitigate regulatory
obstacles. Some firms hope to benefit from expected sterling
weakness, while others displayed concerns regarding skill
shortages. A large number of panellists highlighted difficulties in
making formal plans due to a lack of clarity regarding the UK-EU
relationship.
The overall proportion for Brexit preparedness in the UK service
sector (67%) was similar to that seen in Ireland (65%) and well in
excess of the figures registered elsewhere in Europe, with Germany
in third place at 37% of survey respondents. While some German
service providers reported low trade with the UK, others noted
difficulties in planning for the different potential Brexit
scenarios.
A majority of service sector firms in each of the big-four euro
area nations reported that preparing for Brexit was not applicable
to their business operations. The highest 'not applicable' figures
were recorded in France (77%) and Spain (74%). Among the latter,
there were reports of no direct impacts expected despite concerns
about unforeseeable indirect impacts.
Pollyanna De Lima, Principal Economist, IHS
Markit
Tel: +44-1491-461-075
pollyanna.delima@ihsmarkit.com
Posted 25 March 2019 by Pollyanna De Lima, Principal Economist, Economic Indices, IHS Markit
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
