Manufacturers end year with plenty of festive cheer

Sme manufacturing

Britain’s manufacturers are ending the year with a bang on the back of the continued improvement in global demand and increased export performance, according to new data just released.

According to the EEF/BDO Manufacturing Outlook Q4 survey, manufacturers are continuing to ignore the ongoing political uncertainty at home as improved global demand, from European markets in particular, and the increase in commodity prices is feeding growth across the manufacturing supply chain. This is compensating for weaker UK demand as the squeeze on living standards and Brexit uncertainty continues to take its toll domestically.

This strong performance, across all sectors and regions, has led EEF to upgrade growth forecasts for manufacturing for this year and next, meaning the sector will outperform the economy overall. Furthermore, the positive conditions in the fourth quarter mean that 2017 will be the first since the financial crisis when both output and order balances have been positive in every quarter throughout the year.

The bounce in business conditions seen over the course of this year is driving the need for investment in more capacity to fulfil increasing customer demands. As such we’ve seen the second successive improvement in investment intentions, with the balance of companies planning more capital expenditure hitting a three and a half year high.

Commenting, Ms Lee Hopley, EEF Chief Economist, said: “Stronger global growth has cemented the foundations for growth in manufacturing this year, but the sector’s contribution to the UK economy has been greater than most expected. Not only have we seen consistently positive survey responses in each quarter this year, but growth has been evident across all industry segments and UK regions in 2017.

“There is some confidence that this momentum will carry into 2018, but as we head towards the Brexit end game we need manufacturing to produce the same trick of broad based growth again next year. As we see more companies investing and capitalising on global growth, we’ve become more upbeat in our forecasts for the growth outlook. Government’s industrial strategy is now out of the starting blocks but it needs to maintain a steady pace on delivery of its policy commitments to anchor manufacturers’ growth and investment in the year ahead.”

Commenting Tom Lawton, Partner and Head, BDO Manufacturing, said: “Manufacturers have continued their strong performance into the final quarter of 2017, ending the year with plenty of festive cheer. The sector’s performance is being driven by increasing demand from around the world, in particular Europe. The task of government is very clear: it needs to deliver a Brexit that minimises disruption to manufacturers – they are the economic engine of the UK economy.

“It is encouraging for manufacturers to now see further detail of the Government’s long-awaited Industrial Strategy. However, it is critical that the Government commits to the strategy over the long term (15 to 20 years), avoiding the disruptions of political cycles and encouraging manufacturers to commit to significant capital investments to boost growth and productivity.”

The continued growth in world trade and weakness in the UK market has meant that the gap between export and domestic orders has continued to widen due to rising inflation, slowing consumption growth and Brexit uncertainty.

Nevertheless, longer-term confidence amongst manufacturers about their own firm-level fortunes continued to edge higher this quarter with growing pressure on capacity leading manufacturers to increase investment for the second quarter running.

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