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Undeterred by Brexit

28 October 2016

Our impending exit from the European Union is the biggest issue currently facing industry and the country as a whole. Below James Clark, Secretary-General of BITA, reflects on the specially commissioned post-referendum Forklift Truck Market Outlook for 2016 from Oxford Economics, produced on behalf of BITA.

Given the significance of June’s referendum result BITA decided to commission a special edition of our Forklift Truck Market Outlook for 2016, looking at the impact of the referendum campaign and its result, alongside the possible future impact of Brexit itself. And the report suggests that the economic impact of Brexit might not be as significant as some forecasters are predicting.

While of course aware that negative confidence shocks could still occur, Oxford Economics feels other commentators have been too pessimistic in their assessments and that innovation in new products and technologies could actually lead to renewed demand for forklift trucks.

And the BITA members’ survey, which also forms part of the report, shows that many in the business share this mind set, with the majority of those surveyed believing that their sales will remain unchanged over the next year and over the slightly longer term (three years). The consensus currently is that only small changes will be made to trade arrangements and that there won’t be changes to tariffs that would impede business levels.

Despite this, some of the post-referendum data does make for sobering reading. Counterbalance orders fell by 17.6% in July compared to the equivalent month a year earlier. However, better news was that warehouse orders grew by approaching a third (28.3%) over the same period, illustrating which channels are likely to be most impacted by Brexit.

Consumer consumption is the key driver for warehouse truck demand – and this demand is more closely linked to consumer-facing sectors such as food and beverage manufacture rather than economic cycles – it is less likely to be impacted by any Brexit-related downturn than counterbalance trucks might be. Indeed the report still expects consumption to grow by 2.4% this year, before calming to 1% in 2017.

Oxford Economics now expects GDP growth of 1.1% in 2017 and 1.5% in 2018, compared to the 2.3% and 2.2% respectively envisaged before the referendum result was announced.

Jeremy Leonard, the Head of Industry Services for Oxford Economics, comments that: “Our current forecasts see Brexit affecting the economy mostly through lower investment, especially in the short term. Our GDP growth forecast for 2016 is unchanged, as weaker growth in H2 is offset by the stronger than anticipated Q2, but is set to be lower in 2017 and 2018 than if Britain had voted to remain in the European Union.”

Personally I have to say that as the dust continues to settle on the EU referendum result and the industry has more time to digest the ramifications, the consensus seems to be that things aren’t as bad as first feared. The sector has been employing a business-as-usual attitude rather than sitting on its hands, wondering what to do next. This ‘can do’ approach was particularly evident at a successful IMHX in Birmingham in September where, with 409 companies and organisations exhibiting across 35,000 sqm of floor-space (25% up on 2013), the prevailing mood was positive and optimistic.

No fewer than 16,082 visitors packed out five halls of Birmingham’s National Exhibition Centre (NEC), and as co-owners of IMHX, we can’t help but be delighted at such a successful show. Against a backdrop of such turbulent economic and political conditions, the success of IMHX reflects the fundamental role of the intralogistics industry in supporting the whole of British business.

I think we all realised that it was inevitable there was going to be something of a slowdown in the run-up to the referendum and that the data and forecasts for the period immediately afterwards reflected some uncertainty in the economy, but longer term there doesn’t seem the need for any undue concern provided the Government is strong and sensible in its negotiations. In fact the warehouse order data gives plenty of reason for good cheer and an industry that has survived bigger challenges before now, such as the global financial crisis, won’t be deterred by Brexit.

However, as I write this, the Pound has fallen to near 30 year low, which will effect import prices if sustained over a long period, inevitably affecting prices in the lift truck market. The Prime Minster, Theresa May, has announced that she will invoke Article 50 – which gives a two year timeframe for negotiation around our departure from the European Union – by the end of March 2017. This gives a date for Britain formally leaving the European Union of March 2019 and it is then we will really begin to see what the future holds.

The Forklift Truck Market Outlook includes a detailed overview of sector by sector performance, both in terms of forklift product categories and customer business divisions. It is prepared for BITA by independent economic consultancy Oxford Economics and is available in full only to BITA members as a key benefit of their membership.