As part of my year in Review series, I’ll pick up the story of 2016 from May.
A quick recap..
We were now in the midst of the official campaign period for the EU referendum. For bodies not registered as campaign organisations this meant a lot less letter writing about staying in or leaving the EU.
However, there were some key campaign highlights for those observing proceedings – Gordon Brown weighed in; a televised debate; pollsters were confidently predicting a convincing win for remain, to name a couple.
Thinking back though I don’t recall seeing a whole lot of analysis on what might happen if the UK did decide to leave the EU – would it be a good idea to stay in the Custom’s Union, what is the Custom’s Union, future migration policy – what might that look like? Etc… Hmmm.
Anyway, in other news in May, global commodity markets were continuing to display a fair bit of volatility. One of the consistent themes from EEF analysis of manufacturing conditions in the 18 months or so up to May was the detrimental impact of the low oil price on some oil and gas facing sectors. Fall in US shale gas production was supporting a bit of a rally in oil prices in May – but no follow through on OPEC cuts meant it was short lived.
Peak activity month of the year. The big news was, of course, Northern Ireland making the last 16 in the Euros (other home nations were available).
On the manufacturing front – hopes were starting to build that industry was on course for recovery in the second half of 2016 with a gradual improvement in global prospects pulling output and orders back to growth.
But, what do we know about that anyway. In June we learned that the public was sick of experts, and we’d be wise to keep predictions positive (or otherwise) to ourselves.
Polling experts, on the other hand, were probably best avoided. On the 23rd June, if one were minded to, one could have had 10-1 odds on Brexit. If only.
And then, when the news broke that 52% of the electorate had voted to leave the EU on the 24th June financial markets gave their verdict and Sterling recorded its biggest ever one-day fall. The then PM gave his verdict too and resigned.
Quick out of the blocks, EEF set out what manufacturers wanted the next steps and negotiation priorities to be.
The referendum fall out continued and in what must have been the busiest month on record for survey analysts, the evidence was all pointing to a collapse in confidence across all business sectors and consumers. With the benefit to 20/20 hindsight, much of this analysis hadn’t given businesses or consumers time to start processing the implications of the referendum for them and the sentiment slump proved temporary.
EEF’s survey of manufacturing did get a couple of things right (thankfully). Concerns about rising input costs – a consequence of Sterling’s depreciation – were very prominent in July. A prediction that has indeed been confirmed by official producer price data, PMI indicators and our subsequent quarterly Manufacturing Outlook surveys.
Importantly, particularly in light of flagging confidence levels, we had ourselves a new Prime Minister in July. Candidates for the position jostled for a bit, but in the end it was a one horse race that reached the finishing line well ahead of the expected schedule.
The dust was starting to settle on the referendum outcome, but in the absence of a plan for what to do next, nerves were still on edge about the UK’s economy’s resilience in the face of an (almost) unprecedented bout of domestically generated uncertainty.
The Bank of England was quick to shore up confidence and reassure markets with a monetary easing package, which saw Bank Rate fall to 0.25% and another tranche of assets purchases – to include corporate as well as government bonds. The stock markets were staging a recovery, but Sterling didn’t.
While EEF set out engaging with manufacturers and government officials on the next steps on Brexit we also kept the home fires burning on a number of other fronts. We produced a fact card for manufacturers to answer some of their questions about the fourth industrial revolution.
Only four months to go. Laters.