Britain’s manufacturers are beginning to move through the gears as growth prospects become more positive for the rest of the year, according to Make UK and business advisory firm BDO’s latest report, Manufacturing Outlook Report 2021 Q1, published last week.
Ever since Make UK‘s quarterly survey reported a record-breaking fall in the output balance in Q2 of 2020, the UK manufacturing sector has been gradually rebuilding, restarting, and reopening. The last two editions of this survey indicated the rate of decline for output and orders was slowing, even improving for some businesses.
Make UK and BDO’s latest Manufacturing Outlook Report is the UK’s leading barometer of manufacturing economic activity and has indicated that we are slowly arriving at the light at the end of this long tunnel. Output levels are on the rise for many manufacturing subsectors across the nation as businesses come to grips with a post-Brexit, and soon to be post-Brexit-COVID-19, world.
As the UK accelerates its vaccination programme and plans a cautious roadmap out of the 3rd national lockdown, the latest results indicate the manufacturing sector has been instilled with the much-needed confidence it needs to do business. As the vaccine rollout gains pace and major markets continue to recover, Make UK has upgraded its growth forecast for 2021 from 2.7% to 3.9%, though this shows it will still take some time to recover the 10% fall in output seen last year.
Despite improving confidence levels, export performance remains a concern for manufacturers, particularly SMEs, who face the consequences of exiting a single market. In the past, shipping goods to France or Germany was as easy as manufacturers in the North East transporting goods to the south of England. Now businesses are faced with a plethora of red tape and bureaucracy, which will disproportionately impact the smaller companies that lack expertise than the larger firms that are more able to absorb these costs.
Fortunately, this quarter has reported an end to the continued decline of domestic orders, which lasted almost two years. This is primarily a reflection of the economy re-opening, which has positively affected order books. Although it is too early to tell, it may also indicate a substitution of supply-chains from overseas inputs to more domestic sources, where these are available.
Stephen Phipson, Chief Executive at MAKE UK, comments:
“After the seismic shock to the sector last year, manufacturers are now beginning to move through the gears and accelerate into recovery as major markets also begin to pick up. The major cloud on the horizon, however, remains the transition to new trading arrangements with the EU which go beyond ‘teething troubles.'”
BDO’s Head of Manufacturing, Richard Austin, added:
“With investment intentions remaining in negative territory, the Chancellor’s recently announced super-deduction tax incentive presents a real opportunity for those manufacturing firms with access to finance to bring forward investment plans into the qualifying period and boost their productivity. However, the proposed two-year window is arguably too short. What manufacturers really need is certainty over the longer term to allow the sector to confidently invest over a 10-15 year horizon.”
For more news from the Manufacturers’ Organisation, visit MAKE UK’s News and Events page.