Leaders in the Midlands’ manufacturing sector are the least optimistic about experiencing an uplift in demand in the next 12 months, according to new research from specialist business advisory firm FRP.
Three quarters (75%) of manufacturers surveyed in the region were confident that demand for their products would increase over the next 12 months – below the national average of 87%. Despite a challenging year for the sector, nine in 10 (90%) Midlands businesses are confident they will be able to continue trading over the next 12 months.
The results feature in a new national FRP report, Against the odds: The future of UK manufacturing, which points to a resilient sector that is looking to invest in advanced technologies to help stimulate new growth. FRP conducted a similar study at the end of 2022, which found that manufacturers were far less optimistic about their prospects.
Investment confidence returns
With inflation beginning to ease, the vast majority of FRP’s respondents in the Midlands – which range from SMEs to major employers – are convinced of the robustness of their supply chains, with the vast majority (85%) expecting suppliers to continue trading successfully through the year ahead.
Their top investment priority is increasing output and/or productivity through the creation of new jobs (31%), which speaks strongly of manufacturers’ willingness to develop the sector’s workforce, while over a quarter (27%) plan to seize the opportunity presented by automation and AI.
While just over one in 10 (13%) say they are already using AI, machine learning or automation to its full potential, 58% believe there is the potential to apply it more widely in their organisation.
Still, challenges remain for Midlands manufacturers – chiefly increasing energy costs (46%), the cost of materials (29%) and the availability of labour (21%).
In response, manufacturers are planning a range of measures including increasing prices for customers and distributors (46%), extending terms with suppliers (31%) and – more positively – introducing or expanding the use of automation or AI in production (27%).
Raj Mittal, partner in the Restructuring Advisory team at FRP in the Midlands, said: “The past year has been a difficult one for the region’s manufacturing sector, so it’s encouraging to see such a high proportion of respondents confident in their ability to successfully trade through the next 12 months – this despite confidence in future demand lagging that of manufacturers in other regions.
“There is still uncertainty though, particularly within the automotive sector, which had made great strides towards meeting the initial 2030 ban on petrol and diesel combustion engines ahead of the Government’s decision to extend the deadline.
“Experience shows that businesses which continue to invest through economic uncertainty usually emerge best positioned to benefit from more stable conditions, so it’s encouraging to see such a strong appetite to do so amongst the region’s manufacturers.
“Looking at the results of this report, I’m confident that manufacturers have the plans in place to succeed, with a singular focus on their long-term growth and prosperity.
“The results reflect what we are hearing anecdotally across FRP, as many of the supply issues firms reported last year have now been resolved to a large extent, with the most pressing concerns now on the demand side of the scale. We would hope to see at least a small recovery in demand as inflation eases and consumer confidence stabilises.
“While we await those changes to take effect, it’s heartening to see manufacturers exploring the potential of new technologies, including Artificial Intelligence. The cost of adopting AI can be high and include a lengthy payback period. But, for those that have access to funding, it is something they should be looking at to drive efficiencies and free up human resource.”
