Manufacturing yet to see lift off as growth prospects remain anaemic – Make UK/BDO survey
Manufacturing yet to see lift off as growth prospects remain anaemic – Make UK/BDO survey
But industry predicts economic boost from new Government
Key findings:- Output turns negative for first time in four years
- Domestic market contracts while exports prosper
- Recruitment turns negative for first time in a year but investment activity stable
- Confidence continues to climb despite mixed picture
- And six in ten companies see GDP boost from new Government
- Manufacturing forecast to grow 0.5% in 2024, 0.8% in 2025
The findings come in the Q3 Manufacturing Outlook survey published today by Make UK and business advisory firm BDO. It shows that while growth in manufacturing continues to be anaemic at best, almost six in ten companies (58%) believe that the recent change in Government will lead to better economic growth overall in the next 12 months. In contrast, just 6% of companies expect GDP to decline this year.
As a result, Make UK has upgraded its forecast for the economy overall in 2025 from 0.8% to 1.8%.
Commenting, Fhaheen Khan, Senior Economist at Make UK, said:
“This quarter presents a tale of two halves with output turning negative and recruitment taking a dip, yet investment remains positive and business confidence continues to climb. With an Autumn Budget and Spending Review fast approaching, now is the time for Government to pick up the pace and deliver on pre-election promises, most notably the publication of a long-term robust Industrial Strategy.
“This must be combined with policy levers that help not hinder growth and international competitiveness. In particular, this means bringing forward immediately the UK CBAM and taking measures to tackle the disastrous apprenticeship numbers.”
Richard Austin, Head of Manufacturing at BDO, added:
“Manufacturers are hopeful that a period of greater political stability will provide a better economic outlook ahead, and that in turn is boosting business confidence. Time will tell if that confidence can translate to improved output and orders next quarter, but there’s a growing sense of hope that a rising tide can lift all boats.
“All eyes are on the Government’s next steps. We need an industrial strategy that is fit for purpose to ensure that the confidence firms currently have in future economic prospects is not misplaced.”
According to Make UK, Government should look to keep up the improved outlook for growth by publishing as a matter of urgency further detail on the long-awaited Industrial Strategy. This should include the composition and governance of the Industrial Strategy Council.
Government should also use the next fiscal statement to further boost growth and remove unnecessary barriers including:
- Bringing forward the UK CBAM (Carbon Border Adjustment Mechanism) to 2026. Delaying the introduction of the UK CBAM to 2027, a year later than the EU CBAM, introduces additional risks of trade diversion of materials such as high emission steel in the UK market, which a 2025 introduction of the policy could avoid.
- Reviewing and uplifting apprenticeship funding bands. The cost of running engineering apprenticeships is far greater than the amount employers can currently spend from their levy pots. This has played a major part in a disastrous 40% drop in apprentice starts since the introduction of the Levy.
- Making a greater commitment to more long-term, large scale infrastructure projects that will make the UK a more attractive place to invest. According to Make UK, the Treasury must take a bolder approach to valuing the benefits and return on investment of infrastructure projects by increasing the emphasis on secondary or indirect benefits. Currently, Make UK believes there is too much focus on cost and not enough on outcomes
Export orders (+11%) exceeded UK orders (-4%), but the pattern since the pandemic when UK orders have consistently exceeded export orders is forecast to resume in the next quarter at +27% and +26% respectively.
Recruitment intentions turned negative for the first time in four quarters decreasing from +26% to -1%. However, intentions are forecast to jump in the next three months to +22% as companies take on staff to meet the expected increase in demand and better economic outlook.
Business confidence has also risen to equal the highest level recorded since the survey started measuring the indicator in 2014. The only previous occasion was during the immediate post-Covid rebound. Investment intentions moderated, however, from +15% to +11%.
Make UK is forecasting that manufacturing will grow by 0.5% in 2024. This is a downgrade from 1.2% forecast in the last quarter but is due to ONS revisions on which the forecasts are based. GDP is forecast to grow 1.1% in 2024 and 1.8% in 2025.
The survey of 307 companies was carried out between 25 July and 21 August.
Ends
About Make UK
Make UK, The Manufacturers’ Organisation, is the representative voice of UK manufacturing, with offices in London, Brussels, every English region and Wales.
Collectively we represent 20,000 companies of all sizes, from start-ups to multinationals, across engineering, manufacturing, technology and the wider industrial sector. Everything we do – from providing essential business support and training to championing manufacturing industry in the UK and the EU – is designed to help British manufacturers compete, innovate and grow.
From HR and employment law, health and safety to environmental and productivity improvement, our advice, expertise and influence enables businesses to remain safe, compliant and future-focused.
About BDO LLP
Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.
The organisations we work with are Britain’s economic engine –entrepreneurially-spirited, high-growth businesses that fuel the economy.
We understand the ambitions and entrepreneurial mindset of those we work with and have the global reach, integrity and expertise to help people and businesses succeed.
BDO LLP
BDO LLP operates in 18 offices across the UK, employing 8,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.
BDO’s global network
The BDO global network provides business advisory services in 166 countries and territories, with more than 115,000 people working out of 1,776 offices worldwide. It has revenues of US$14bn.