The British industry is facing higher costs due to customs delays and red tape, which will be one of the biggest challenges facing firms this year, according to manufacturers.
Make UK, the industry body representing 20,000 manufacturing firms across the country, said that while optimism had grown, it was being undermined by the after-effects of the UK leaving the EU.
Two-thirds of industrial company leaders said Brexit had hampered their business one year after the end of the transition period. More than half of the firms warned they were likely to suffer further damage this year due to customs delays due to import checks and changes to product labelling.
According to the 2022 MakeUK PwC senior executive survey, Brexit disruption remains one of the biggest concerns facing industry bosses for the year ahead, as Britain leaves the EU and the rising costs facing companies, according to the 2022 MakeUK PwC senior executive survey.
There were concerns raised by delays at customs, additional costs from meeting separate regulatory regimes in the UK and the EU, and reduced access to migrant workers in the survey.
The report said that Britain and the Covid 19 epidemic have had a scaring effect on the mentality of many businesses, which are traumatised by the ongoing delays and disruptions to their supply chains.
The warning came as other research showed Britain's economy was losing steam at the end of last year as the Omicron variant hit demand for goods and services.
Business optimism and output growth fell in December as firms struggled with the fallout from the latest wave of Covid infections, according to analysis of leading business surveys by BDO, an accountancy firm, and the Centre for Economics and Business Research.
In a separate survey by IHS Markit and NatWest, IHS found that activity dropped in 11 out of 12 regions of the UK, with a loss in momentum in London and the north-east falling into contraction.
Kaley Crossthwaite, a partner at accountants BDO, said: Ongoing uncertainty around Omicron is a further blow to UK businesses that have already battled a string of supply chain issues, the threat of moreCovid restrictions and inflationary pressures this past year. Three-quarters of companies in its senior executive survey expected manufacturing to improve over the next year despite concerns over the impact of Brexit and the Omicron variant.
About 73% of companies said they believed that opportunities outweighed the risks, with nearly three-quarters of companies believing that conditions for the sector would improve.
That optimism was tallied with a separate survey of chief financial officers of large companies by Deloitte, another accountancy firm. A record 37% of the population plan to increase capital investment in the next year, according to the latest quarterly survey. More companies are considering expanding into new products, services, or markets than ever since it began in 2009.
The financial executives believed that Brexit would be a significant negative for trade and migration in the UK-EU.
The Make UK survey showed that two-thirds of companies think the UK is a competitive location for manufacturing, despite the fact that the confidence was tempered by the impact of Brexit, Covid 19 and rising costs.
Around a third of companies in the survey were looking to reshore their supply chains to rely more on domestic sources after severe disruption to the delivery of international components and materials.
Make UK said that the shift could represent the possible death of the just-in-time supply chain business model, which may be a good thing for British manufacturers, who are now developing ways to be more resilient and less exposed to international risks in the future.