Strong performance in UK manufacturing and industrial sector helping to boost economy
THE UK economy is showing signs of improvement, which is being led by strong performance in the UK manufacturing and industrial sector.
Yorkshire business leaders and investors were given glimmers of hope, as one of the UK’s top portfolio managers, James Henderson, and economic expert Chris Hills hailed this sector as a great place to be and investing in its shares, as a window of opportunity.
Mr Henderson, who manages four investment trusts worth more than £1.35bn for Henderson Global Investors, and Mr Hills, chief investment officer at Investec Wealth & Investment, reflected on the industry at a breakfast seminar in Leeds organised by TheBusinessDesk.com in association with Investec Wealth & Investment. The event took place at the Hilton Doubletree.
Divisional director, UK investment for Henderson Global Equity Team, Mr Henderson, gave the audience a portfolio manager’s view of UK industrials and explained why the sector had been unloved by investors.
He said: “The reason I have industrial shares is purely because I think they are going to go up.”
Mr Henderson said that in the UK industrial and manufacturing sector, there has been a revival in buyers and over the past ten years, this sector has grown, much due to companies focusing on what they are really excellent at.
He said that over these ten years, shares in the UK industrial sector have significantly outperformed the FTSE All Share Index but stretched over 20 years from 1993, they have underperformed against the index.
Growth in the UK economy was highlighted during the seminar.
”There is a patch of real genuine growth in the UK and certain industries are doing really well, such as the aerospace industry, “ Mr Henderson said.
“There are good entrepreneurs and real opportunities there.
“Rolls-Royce is the great success story of UK industry, too, and companies alongside them have benefited. Rolls-Royce shares have gone up 10 times over the last 10 years – I shouldn’t have sold them!
“The Chinese are not going to be able to develop an engine like the Rolls-Royce Trent jet engine – it will be a long time before they have an aerospace industry.
“So many different people are now buying the R-R engine, there is real depth to the order book which stretches to 2018/19.”
Mr Henderson said the UK automotive industry is undergoing a “real renaissance” with car production doubling between 2010 and 2015, with over 80% of production for export.
He said that car manufacturers like Jaguar Land Rover might be foreign owned now but there are huge benefits for their UK suppliers and also cited the example of A&J Mucklow, a quoted industrial property company in the Midlands, whose share price has increased since 2010 as industrial rents have risen and demand for space has increased.
Mr Hills of Investec Wealth & Investment discussed positivity in the economy.
He said: “The good news for business leaders and investors is that the stock markets are telling us life is getting better.
“The level of balance sheet strength in the UK manufacturing is really quite good. What they have lacked is business confidence and spending. The clouds are gradually lifting and that is what the stock markets are seeing.”
However, unemployment in the under 25s was highlighted and Mr Hills said this was a big issue for the UK.
He also said that although he believes we are “through the darkest time”, business confidence was the biggest thing affecting UK businesses.
Discussing the Eurozone, Mr Hills told the audience that despite the headlines focusing on the recent crisis in Cyprus, this country is actually small within the Eurozone and only holds 0.25 per cent of the GDP and therefore, alone, it is unlikely to de-stabalise the continent. But he warned that it set the president to penalise the banks, which could undermine other European banks, especially in Spain.
Summing up, he said: “We do think the market will be better in 2014. We don’t think interest rates will rest in the UK for the next couple of years but we expect corporate profits to be up this year. We think politicians are slowly heading towards getting it right.”
