Manufacturers’ confidence hit by oil price falls

THE NORTH West’s manufacturing sector is the largest outside London and the South East for output and employment, but confidence has been hit by the falling oil price.

This is according to a regional report launched by EEF, the manufacturers’ organisation and law firm DLA Piper.

The study says there are 13,855 manufacturers in the region, 56% of which are SMEs. Pharmaceutical (14.8%), food and drink (13%) and metals (12.7%) are the three biggest industries in this region.

Outside of a dominant London and the South East, manufacturers in the North West lead the way when it comes to exports and output.

The report – Regional Manufacturing Outlook – draws upon survey data and the latest ONS figures to provide a longer-term picture of the state of UK manufacturing. It shows that the North West scores highly for exports, accounting for almost 9% (8.9%) of the UK’s manufactured exports – the third biggest contribution by any single region.

The EU is the UK’s largest market for manufactured exports and this is no different in the North West. More than half (52%) of the region’s goods exports go to the EU while 16% go to its second biggest market, Asia.  

At 90.4% of the UK average, the North West region is middling for productivity. However, it outstrips most other regions for the contribution its manufacturing sector makes to output. Manufacturing contributes 14% to regional output and 13% to the UK’s total manufacturing output – the second highest contribution from any single region.

There is also good news on the employment front. One in 10 workers in the North West (11%) are employed by manufacturers. And, despite seeing the largest reduction in employment since 2010 out of all the regions, North West manufacturers still employ over 338,000 people across the region.  

The region has however felt the brunt of falling demand from the oil and gas sector following the collapse of the oil price in late 2014. Along with Scotland it was one of the worst-hit places in the UK, mainly because of the dominance of its metals industry.

The negative impact is easing and the sector is expected to perform better in the second half of this year.

However the challenging start to 2015 has dented manufacturers’ optimism leaving the North West trailing 5th out of nine regions.

Stephen Fitzsimons, North West membership and external affairs manager at EEF, says: “This report shows that in many ways North West manufacturers are punching above their weight and putting our region on the map. Almost 9% of the UK’s manufactured exports are being made in our region and this success story enables our ingenuity, creativity and skills to be recognised around the world and particularly in Europe, our biggest export market.

“Despite this, manufacturers are feeling less confident than many of their peers in other regions. This undoubtedly reflects the strong links between the North West and the oil and gas industry in the North Sea, which have acted as a drag on growth and optimism.”

David Gray, partner at DLA Piper, added: “It is almost inevitable that business confidence amongst manufacturers in the North West is taking a little longer to return than in other UK regions. It takes a lot to change the mood of a sector with significant and broad-based manufacturing output, particularly given the impact of the unstable oil and gas sector on so much of the region’s manufacturing sector.  

“In spite of being a major employer in the region, manufacturers still remain justifiably concerned about skills gaps both in more traditional industries and in those at the cutting edge, which play to the region’s entrepreneurial traditions.”