West Midlands manufacturers begin long road to recovery
West Midlands manufacturers are continuing the long road back towards growth from the historic lows experienced earlier in the year, according to a survey published today.
However, the survey by Make UK and business advisory firm BDO also shows the brutal impact of the pandemic with the sector forecast to see a 12% drop in output nationally this year, while Make UK has also substantially downgraded its growth forecasts for the sector overall for 2021.
A bumpy road also lies ahead with a darkening outlook for exports ahead of the final departure of the UK from the EU, with the motor vehicles sector in particular especially fearful of the potential impact of any tariffs from ‘no deal’.
According to the survey, output in the West Midlands increased significantly to a balance of +24%, substantially ahead of the national average. This is mainly reflected in the positive picture for UK orders which is substantially above the national average, while the picture for export orders is substantially more negative, reflecting the West Midlands exposure to the EU and the automotive sector where the picture has darkened nationally ahead of the end of the transition period.
Despite the gradual improvement in business conditions, recruitment intentions are still flat while investment intentions are substantially negative, reflecting the efforts of companies to control costs and manage debt accumulated during the crisis.
However, business confidence among West Midlands manufacturers has risen indicating that they see a brighter outlook for next year.
Charlotte Horobin, region director for Make UK in the Midlands, said: “Manufacturing has stepped back from the abyss that it stared into earlier in the year. But, make no mistake it is going to be a long haul back, with talk of a V shaped recovery nothing more than fanciful. However, having endured over four years of political uncertainty, combined with the pandemic many in industry are feeling like an exhausted boxer in the final round of a bout, with a ‘no deal’ exit from the EU potentially landing a knockout blow.
“Should this happen the nascent recovery is likely to go into reverse, with significant damage to manufacturing and job losses following in already hard hit areas and sectors. It is essential that the first step towards a fuller recovery is provided by a comprehensive tariff and, quota free, trade agreement with the EU with a sensible range of easements to allow business some time to adapt.”
Jon Gilpin, head of manufacturing at BDO in the Midlands, said: “After a torrid year, manufacturers in the West Midlands who rely on Continental supply chains and export markets now face a race against the clock to prepare for the end of the transition period. The prolonged negotiations with the EU have made this far more difficult than it should have been. Manufacturers are now desperate for greater clarity so that they can be released from the post-referendum paralysis which has made it nigh-on impossible to take long term decisions.”
In response to the continued impact of the pandemic on the sector and the fact recovery is likely to now be more drawn out, Make UK has substantially downgraded its forecasts for manufacturing growth nationally to just 2.7% in 2021, down from 5.1%. GDP is forecast to contract by 11.3% in 2020 and grow 5.4% in 2021.
