Mixed picture for region’s manufacturers
West Midlands manufacturers are seeing a mixed picture in the first quarter of the year as the continued struggles of the automotive sector hit the region.
A survey published today by Make UK and business advisory firm BDO shows the brutal impact of the pandemic with the sector overall seeing a drop in output of 10% nationally last year.
However, reflecting the more positive picture as the year progresses Make UK has upgraded its growth forecasts for the sector for 2021.
According to the survey, output in the West Midlands improved from the end of last year but remains marginally negative at a balance of -4%. A similar marginally negative picture is shown for both UK and export orders, reflecting the downturn in output seen by the Automotive sector over the last year which has rippled down through the supply chain in the region.
Reflecting the continuing difficult business conditions, recruitment intentions have also remained negative as have investment intentions which, at a balance of -38%, are the worst of any UK region.
Make UK also warned that the main drag on a more positive picture through the year 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 through the year, 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 West Midlands are seeing a slow road to recovery, especially given the major structural issues affecting the automotive sector and its supply chain. 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 West Midlands manufacturers reporting the lowest investment intentions of any UK region, the Chancellor’s recently announced super-deduction tax incentive presents a real opportunity for those 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 the region’s 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 in some ways encouraging, the next six to nine 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.”
