Region’s manufacturers move through gears towards growth

East Midlands manufacturers are beginning to move through the gears towards growth from the historic lows experienced last year, outperforming other UK regions in the process.

That’s according to a survey published today by Make UK and business advisory firm BDO.

However, the survey also shows the brutal impact of the pandemic with the sector overall seeing a drop in output of 10% nationally last year.

But given the more positive picture Make UK has upgraded its growth forecasts for the sector for 2021.

According to the survey, output in the East Midlands increased significantly to a balance of +36%, the highest of any UK region, possibly due to the region’s important food and drink sector which is performing well nationally.

This is also reflected in the positive picture for UK and export orders which have increased substantially from the end of last year with both indicators being the best performing of any UK region.

Reflecting the improvement in business conditions, recruitment intentions have also improved substantially as have investment intentions which have turned positive for the first time in a year.

Make UK warned, however, that the main threat to this more positive picture remains the continuing difficulties for exporters to the EU. In response it is urging Government to work with industry to smooth out the bureaucracy and other border related issues.

In response to the improving business conditions Make UK has upgraded its forecasts for manufacturing growth this year to 3.9%, up from 2.7% at the end of 2020.

Charlotte Horobin, region director for Make UK in the Midlands, said: “After the seismic shock to the sector last year, manufacturers in the East Midlands 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’.

“Government must recognise this and work with Industry and the EU to smooth these problems out, or the problems we are seeing now will become structural and permanent. This will have long-term consequences for exporters who will lose business and importers who will choose to give up on the UK market altogether.”

Jon Gilpin, head of manufacturing at BDO in the Midlands, said: “With investment intentions among East Midlands manufacturers looking up, the Chancellor’s recently announced super-deduction tax incentive presents a real opportunity for 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 East Midlands manufacturers really need is certainty over the longer term to allow the sector to confidently invest over a 10-15 year horizon.

“While the results of this quarter’s survey are encouraging, the next 6-9 months will nevertheless be critical for those manufacturers facing financial distress. Many will have deferred tax payments and taken on additional loans to help them through the crisis. The recently announced extension of the furlough scheme and other support measures will help in the short term, however, many will need to use this time to plan and implement turnaround strategies – and in certain cases take some tough decisions.”

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