Tough outlook for region’s manufacturers

West Midlands manufacturers are continuing to see “very difficult” trading conditions as they approach the New Year as the impact of political uncertainty and downbeat world markets drags on.

According to the Make UK/BDO Q4 Manufacturing Outlook survey output and total orders declined to a balance of -11% and -14% respectively. In particular, the output level is the worst of any UK region and is almost certainly linked to the ongoing difficulties being experienced by the automotive sector.

Both UK and export orders declined to -27% and -9% respectively with the decline in domestic orders being the sharpest of any UK region and again most likely due to the automotive sector.

This difficult picture is reflected in recruitment and investment intentions, which are both down sharply to balances of -16% and -14% respectively and significantly weaker than the average for all UK regions.

Looking ahead, overall conditions are expected to remain anaemic over the next twelve months and Make UK is now forecasting manufacturing growth of just 0.1% in 2019 and downgraded to 0.3% in 2020 (down from 0.6%). GDP is forecast at 1.3% in 2019 and 1.4% in 2020.

Charlotte Horobin, region director at Make UK in the Midlands Region, said:
“Uncertainties about the outcome of Brexit and the impending general election continue to weigh on the UK manufacturing sector and the difficulties in the automotive sector are adding to the difficult market conditions companies are facing.

“Christmas, and the end of the year, are a time when people reflect on the past and try to begin afresh. Manufacturers will hope that the next twelve months will see an end to the political charade in Westminster and a return to focus on critical issues such as delivering a long term vision for the economy.”

Jon Gilpin, head of manufacturing at BDO in the Midlands, said: “Investment is critical to UK manufacturing. It is worrying that investment levels are in negative territory but this isn’t wholly surprising given the sector has suffered a series of declines UK-wide since the start of the year.

“While the prospect of a no-deal Brexit should be less of a short-term worry now, manufacturers are still clearly facing an uphill battle. The sector is facing increased global competition and major change in respect of industry 4.0 and sustainability.

“An increase in capital allowances – something that a quarter of companies see as a priority for the new Government – would be a good incentive to boost capital investment in 2020 and beyond. This should be considered as part of a long-term sustainable industrial strategy.”