East Midlands manufacturers have seen a mixed picture in the first quarter of the year, although the trends are far more improved since the second half of last year, easing fears of a significant recession for industry in 2023.
The findings in the Make UK/BDO Q1 Manufacturing Outlook survey show a marked pick up on the picture in the final quarter of 2022, albeit from a very negative picture in the second half of last year. The figures echo the gradual improvements in other data such as the UK and European PMIs, which are now only just in negative territory, as well as a strong pick up in demand from China.
According to Make UK and BDO, this mixed picture reflects the ongoing difficulties being experienced by the automotive sector and the ripple effects being felt down the supply chain amid the transition to electric vehicles. However, this is balanced against the strong performance of food and drink where the East Midlands has a strong exposure.
Both output and orders picked up in the region although the balance on output was only just positive at +6%, an improvement mainly driven by export orders as UK orders remained very weak. However, despite this improving picture, employers’ intentions to invest remained at weak levels although conversely recruitment intentions were very strong showing employers are anticipating a pick-up in demand. Looking forward, the next quarter remains mixed although export orders are forecast to pick up significantly and investment intentions are also set to turn positive.
As a result of this mixed picture and the lack of any significant upturn in growth, Make UK is still forecasting a contraction for manufacturing in 2023 as the substantial challenges the sector is facing show few signs of abating.
Charlotte Horobin, Midlands director at Make UK, said: “Manufacturers in the East Midlands have seen a rebound at the start of the year as conditions have improved in their major markets and, business confidence has improved.
“However, one swallow doesn’t make a summer and it is far too early to say the worst has passed given the significant challenges the economy faces. However, the Budget should help boost investment in the short to medium term although ideally, full expensing should be made permanent to better reflect the investment cycle for manufacturers.”
Jon Gilpin, head of Manufacturing at BDO in the Midlands, added: “Despite a few glimmers of good news such as improvements in output and orders picking up in the region, inflationary pressures are still very evident for UK manufacturers with increased costs still being passed on. We caution that worst of conditions for the sector may still be to come. Manufacturers and investors need consistency and commitment to long-term support to shape their next steps.”
In terms of overall output this year Make UK is forecasting a contraction of -3.3% (a slight improvement from -4.4% forecast at the end of last year) and growth of just 0.8% in 2024.
