Productivity dip fails to dent manufacturers’ optimism
Manufacturers in the West Midlands are ending the year on a high as they continue to benefit from healthy business volumes – despite the dip in productivity.
The conclusion is reached in a new survey conducted by EEF, the manufacturers’ organisation and BDO.
The Q4 Manufacturing Outlook survey shows output across the region dipped slightly from the last quarter to +24% but this comes on the back of historic highs earlier in the year.
Overall orders also dipped slightly to +21% but remain healthy, reflecting the national picture of a sector benefitting from increasing demand from Europe and other growing markets around the world.
This strong performance and the need for extra capacity is also boosting employment in the sector, with recruitment intentions in the region remaining strong at +15%.
However, after a sustained period of investment, this fell back in the last quarter to the lowest of any UK region.
Yet despite this, business confidence amongst West Midlands manufacturers has increased to the second highest of any UK region, indicating firms are optimistic as they head towards 2018.
As a result of the strong conditions for manufacturing through 2017 and the positive outlook for 2018, EEF has upgraded its forecasts for the sector to +2.1% and 1.4% respectively.
This is faster than the UK economy overall where, in line with the OBR forecasts at the Budget, EEF expected tepid UK growth of 1.5% in 2017 and 1.3% in 2018.
Charlotte Horobin, Region Director for EEF in the West Midlands, 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.”
Tom Lawton, partner and BDO’s national head of manufacturing, said: “Manufacturers in the West Midlands 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.”
