Manufacturers see continued growth but challenges remain

West Midlands manufacturers are continuing to see strong growth prospects as economies continue to open up and the economic recovery strengthens, according to a survey published today by Make UK and business advisory firm BDO.

Having seen a brutal 10% decline in output in 2020, the sector in the UK overall is now set to recover a significant amount of that loss in 2021, with forecasts suggesting it will have recovered the total loss from last year by the end of 2022.

Make UK, added, however, supply chain disruption and some labour shortages could hamper this improving picture in the final quarter of the year.

The slow recovery in the automotive sector where the West Midlands has a high exposure could also have an impact for some time.

In particular, both UK orders and total orders were strong for West Midlands companies with the total order balance of +54% very robust by historical standards. While output fell slightly, due to a reduction in car production in the last quarter, the business confidence indicator remains positive and points to continued growth for the immediate future.

Despite the robust outlook, both investment and recruitment intentions were below the UK average.

Make UK is now forecasting growth for the sector of +7.1% in 2021, tailing off slightly to +4.4% in 2022. However, should these be met it will ensure the sector has recovered all the lost output from 2020.

Charlotte Horobin, region director for Make UK in the West Midlands, said:
“West Midlands companies are continuing to see positive growth conditions as prospects continue to accelerate for manufacturers with economies at home and abroad continuing to open up. However, the mixed prospects for the automotive sector, supply chain shortages and the rapidly escalating increase in shipping costs are threatening to put roadblocks on the road to faster growth despite the current optimism.”

Jon Gilpin, head of manufacturing for BDO in the West Midlands, said:
“West Midlands manufacturers have proved their resilience over and over again, but we know big challenges remain.

“While our latest analysis provides some really promising results, increasing costs, rising inflation and the ongoing battle to attract and retain skilled workers locally will continue to stress-test regional manufacturers for the remainder of the year.”