There may be trouble ahead… Latest UK Manufacturing Outlook Survey

The latest Make UK/BDO UK Manufacturing Outlook Survey this quarter outlines that “the positive picture of the first half of the year has now gone sharply into reverse” according to The Manufacturer.

Not a good start to a Monday.

Manufacturers are entering the final quarter on an increasingly unsteady footing. In the absence of an overarching industrial strategy from government, businesses will be forced to cut back, protect margins and focus on building on operational efficiencies over the next few months.

Richard Austin, BDO’s National Head of Manufacturing

According to the report, the UK manufacturing sector is expected to slow down in the third quarter of 2023, but it’s not all bad news. There are still some good things happening, and the sector is still resilient.

UK Manufacturing Outlook Survey in a nutshell…

• Output: The Make UK/BDO Manufacturing Outlook survey forecasts output growth of 0.6% in Q3 2023, down from 1.2% in Q2.
• Orders: The survey also forecasts orders growth of 1.2% in Q3 2023, down from 2.4% in Q2.
• Profit margins: Profit margins are expected to continue to fall in Q3 2023, as businesses struggle to pass on rising costs to consumers. The survey found that 60% of manufacturers expect their profit margins to decline in the next quarter.
• Investment: Investment is expected to remain subdued in Q3 2023, with only 37% of manufacturers planning to increase investment in the next quarter.
• Employment: Employment is expected to remain stable in Q3 2023, with 53% of manufacturers planning to keep their headcount the same and 47% planning to increase their headcount. However, there is a risk of job losses in the coming months if the economic outlook worsens.

Weathering the storm in 2024?

The manufacturing sector is facing a number of challenges, including:

• Rising inflation: Inflation is at a 40-year high in the UK, and this is putting a strain on businesses and consumers alike. Manufacturers are facing higher costs for raw materials, energy, and transportation.
• Supply chain disruptions: Supply chain disruptions have been a major challenge for manufacturers since the start of the COVID-19 pandemic. These disruptions have been exacerbated by the war in Ukraine, which has led to shortages of key commodities such as wheat, metals, and energy.
• War in Ukraine: The war in Ukraine is having a significant impact on the global economy, and the UK manufacturing sector is no exception. The war is leading to higher energy prices and supply chain disruptions, and it is also dampening consumer confidence.

The outlook for the UK manufacturing sector is uncertain. The sector is facing many challenges, but there are also some positive signs. For example, the sector is still growing (forecast of 0.5% in 2024), and there is strong demand for UK-made goods in overseas markets.

In terms of overall output this year Make UK and BDO are forecasting a contraction of -0.5%, slightly worse than the -0.3% forecast in Q2. However, Make UK downgraded its forecast for 2024 to growth of just 0.5%, down from 0.8% in Q2.

The Manufacturer

Overall, the UK manufacturing sector is expected to experience slower growth, even decline in the third quarter of 2023. However, the sector is still resilient and there are some positive signs for the future.

Is the UK Government supporting enough?

The UK government has announced a number of measures to support the manufacturing sector, including tax breaks for investment and funding for research and development. However, manufacturers have called for further support from the government, particularly in the areas of energy costs and supply chain resilience.

So what were our takeaways?

The UK manufacturing sector is facing some tough challenges, but it’s important to remember that it’s still a resilient sector with a lot to offer. The government needs to do more to support the sector, particularly through the current economic turmoil. But manufacturers themselves also need to be adaptable and innovative in order to thrive in the months and years to come.