Published Wednesday 12th February 2020
Few UK industries have struggled in the last few years as much as manufacturing. Consistent stories of lowering expectations, stalling investment and slowing demand have highlighted a sector in need of support and stability if it is to thrive going forward.
However, while long-term concerns remain, recent reports suggest that opportunities across the manufacturing industries could be set to increase. As studies indicate that optimism is returning to the manufacturing sector, could 2020 be the year manufacturing makes its comeback?
A Spring in The Step of UK Manufacturers
At the end of January, the Confederation of British Industry (CBI) released the findings of its latest Industrial Trends Survey, shining a light on the current mood of UK manufacturing firms. The CBI found that business optimism in the manufacturing sector had completely transformed in the three months to January.
From -44% optimism in October, manufacturers now recorded a score of +23%. This swing is not only the largest ever recorded but also represents the highest score for business optimism since April 2014.
These optimism scores came despite 33% of surveyed businesses reporting a reduction in output over the last three months. Concerns remain in particular for the car manufacturing sector, which showed a significant drop in this regard.
The Boris Effect
Despite a drop in real output across manufacturing, there’s a +4% expectation that output will stabilise in this quarter. It might not sound like much, but that is the best score for that metric in the last seven months. Manufacturers also expect total orders to increase over the coming quarter, primarily from exports.
In reality, almost every conceivable metric saw some signs of growing optimism going forward compared to the three months previously. It is likely no coincidence that these results have been recorded either side of the 2019 General Election and the confirmation of Britain’s exit from the European Union with an agreed transition period.
December’s General Election delivered a significant and unexpectedly large victory for Boris Johnson and the Conservative Government. Much of this success was built on promises of support for struggling industries and a global export market post-Brexit. The clear victory gives the Conservatives the power to act on their ambitions, clearing the air of confusion that had caused significant hardships for the sector.
One such example of this is manufacturer’s thoughts concerning investment. For much of the last three years, investment in industries across the UK has stalled due to political uncertainty. After five consecutive quarters of falling investment expectations, the latest CBI survey recorded a +5% expectation of increased spending on plants and machinery over the next three months.
Furthermore, while building investment remains negative, it has seen considerable improvement, from a score of -44% in October to just -11% in the latest survey.
The Road to Recovery
While there is evident optimism across much of the manufacturing sector, there is also an acknowledgement that more tangible improvements will need to be felt before this hope can be realised. The CBI’s Deputy Chief Economist Anna Leach said in a statement that “this boost to sentiment belies poor trading conditions over the past quarter” and again highlighted the immense importance placed on achieving a long-term trade deal with the EU.
The performance of the vehicle manufacturing sector is still a pressing concern that the UK government will need to solve quickly. According to the Society of Motor Manufacturers and Traders (SMMT), the UK’s new car market declined by 7.3% in January. Overall production fell to its lowest in almost a decade last year, while government ambitions to end the sale of petrol, diesel and hybrid cars by 2035 have thrown more doubt onto the sector.
While there are still concerns both internally and externally, UK manufacturing businesses can take heart from growing optimism across the sector. It appears that now is a great time for manufacturers to start considering how they can promote their long-term growth through effective investment and cost reductions strategies.
Here at Expense Reduction Analysts, we’re experts at helping businesses streamline their supply chains through effective manufacturing procurement. Our industry experts have years of experience across manufacturing sectors and can help to save you money through the implementation of long-term strategies. If you’re interested in taking advantage of growing industry optimism and want to unlock capital to invest, why not speak to our team today and see what we could do for you?