Comment #5
So what are manufacturers telling us now we’re more than half way through the year?
Well on the positive side output has held up to date and, so has employment.
Wages in the overall economy have risen by 3.3% – 1.5% above inflation – albeit wages in manufacturing have risen by a lower 2.2%.
But, and it is a big but there are now significant clouds on the horizon…
Export orders from Asia and Europe remain near their lowest since 2016 as foreign customers increasingly move away from buying UK goods due to Brexit uncertainty.
Stockpiling ahead of the original Brexit deadline of March 29th was the highest level ever recorded in the G7. The result, as we now know from our latest figures is that imports rocketed up by 11% in Q1 this year.
The effect of stockpiling and even more of the difficult investment and global demand situation had a clear and different effect on subsector performance. If stockpiling boosted production, it wasn’t the case for all manufacturers. The plunge in investment in the UK and the slowdown of the global economy are affecting negatively machinery producers which are suffering a contraction together with the motor vehicle sector and its vast supply chain hit by Brexit uncertainty, the global car manufacturing slowdown, and the drop in car registration.
The consequences of this scenario are also well highlighted in the regional performances with regions showing different stories. As an example, the Midlands enjoyed the food & drink boost but it also faced some difficulties related to the motor vehicles sector. The North West saw growth grew in output and employment thanks to the pushed derived from chemicals and pharmaceuticals production.
The resilience of the sector shows that manufacturing can continue to be the engine of our economy long into the future. It already contributes more in GDP terms than even financial services or construction. Manufacturing businesses contribute nearly 3 million jobs, most of which pay above the national average, the sector contributes half of UK exports, comprises the bulk of this country’s R&D spend, and the UK is today the 9th largest manufacturing economy in the world in GDP terms. Manufacturing is vital to the British economy and we must work together to make sure we are able to build on this ongoing success.
*First published in PWE Magazine https://pwemag.co.uk/
