1) Manufacturing has had an excellent 12 months across the UK
The manufacturing sector has been riding a positive wave over the past year (2017q3 – 2018q2), with the synchronized upturn in the global economy, the weaker level of Sterling since mid-2016, and the global revival in business investment all helping to boost manufacturers across the UK.
The regional summary of our Manufacturing Outlook results is case in point; with a clean sweep of positive balances across the board and only one single digit balance recorded, a rare feat in our survey. While looking at the quarterly profile of these balances points to an easing in momentum at the start of this year, this should not detract from what has been an exceptional 12 months for manufacturers in the UK.
2) Confidence has picked up across most areas
The past year has seen a pick-up in confidence across the majority of UK regions, continuing the recovery from the wobble in the immediate aftermath of the Brexit vote. Only the East of England, South East and London, and West Midland’s bucked this trend, remaining below their pre-Brexit levels. The broad improvement in confidence is not that surprising given the exceptional year manufacturing on the whole has had, with order books well stocked across the year. Nevertheless uncertainty, particularly the closer we get to the 2019 EU exit deadline, as well as rising global trade tensions, risks hindering manufacturers’ outlook in the coming year.
3) Sectoral make-up drives performance
As always, given that manufacturing is not a homogenous industry, the sectoral make up in each region has helped to determine its performance.
In the ascendancy this year are regions with a dominant metals industry – which has had a better time of it following action on global capacity and rising prices. These regions include the North East, which saw the biggest improvement in orders on last year and Yorkshire and Humberside. Regions with a heavy presence of capital goods manufacturers – such as the South East and West Midlands were also among the better performing regions.
Conversely a number of regions have felt the adverse effects from the weakness in the construction sector and the poor weather at the start of 2018, but this has not been enough to make their performance materially weaker.
4) Investment only downside in this year’s report
If there is one downside in this year’s report it is that investment balances in general remain weaker across regions, with political and economic uncertainty as a result of the UK’s upcoming departure from the European Union holding back some capex spending. It appears manufacturers while increasing investment to satisfy current demand requirements, are holding off larger scale investments until they have some clarity on the post-2019 landscape.
5) Productivity varies across regions
Productivity is the buzz topic at the moment, and we have been doing a lot of work on how we can get manufacturing productivity back on trend. With that in mind in this year’s Regional Outlook we decided to shine a light on each regions manufacturing productivity performance. As we can see there are huge variations across the country, with the North West, Scotland and South East the stand out performers – the former a likely result of the pharmaceutical hub in the region.
Conversely there is clearly work to be done in a number of other regions – namely London and the Midlands, which fall well below the UK average.
You can read the full report here.