Will anything knock UK manufacturing growth off course in 2018?

Hang on… I thought we were all worried about Brexit?

Don’t worry, you’ve not got the wrong end of the stick. Despite the expected positive outlook for economic conditions in 2018, companies in the survey are still very much alive to the risks that could knock growth off course – including Brexit.

Following the past two years where a positive balance of companies have said that they ‘see more risks than opportunities in the year ahead’, the view for 2018 is unfortunately no different.



Lee’s blog covers the Brexit related risks which dominate this year – including concerns about exchange rate volatility and worries about an increase in EU nationals leaving UK manufacturing firms.

So are all risks related to Brexit?

No. Whilst it is easy to look to Brexit for the reasons for seeing more risks than opportunities, and indeed it is one area which is very much exacerbating risks, it is not the only reason for manufacturers to enter this year with a degree of caution.

For example:

1. A robust upturn means capacity concerns. With companies reporting improving orders and output levels throughout last year, and with this picture likely to continue in the next 12 months, there is a growing pressure on capacity in the sector.
2. Balancing the technology risk and reward. Throughout 2017, the fourth industrial revolution and the ability of technology to transform the manufacturing sector was a hot topic. But risks inevitably run alongside the opportunities and rewards. Over six in ten businesses in the survey said that disruptions due to a cyber-attack was on their risk radar for the year ahead.
3. Risks in the policy environment. In addition to all the risks that policy makers will be navigating as they negotiate the UK’s exit from the EU, there are other policy decisions which matter to manufacturers – they are keen to see departments getting into implementation mode on industrial strategy.
   
   

So no sitting back and relaxing then?

With a busy but risky year ahead, firms have new strategies in train to help ensure success. Topping the list are actions that manufacturers will be taking in order to meet increased demand and deliver expected productivity aims. While there is a dominance of ‘business as usual’ strategies there are also a host of planned actions closely related to potential risks on the horizon.

• 86% of companies are increasing efforts on process innovation and efficiency improvements
• Two-thirds of manufacturers will be looking to do more to market themselves overseas this year
• 40% of the companies are increasing action to ensure they are protected against bad debts
• 72% of companies are looking at increasing the level of automation in their production processes
• The same proportion will be collaborating more closely with their supply chain to improve flexibility
• 71% will be prioritising action to protect against identified cyber risks
• 38% will be looking again at their foreign exchange management this year

There has been no shortage of risks and challenges facing UK manufacturers in the past decade. Companies have told us previously that uncertainty is the new normal and in the past three years have consistently identified more risks than opportunities for their business in the year ahead. In spite of this and perhaps because of the strategies manufacturers develop and implement in response, the UK remains a good place for manufacturers in 2018.