More than half of exporters in the manufacturing sector (55%) say demand for their goods overseas is growing, with the EU poised to remain the key growth market for manufacturers over the next five years, reveals a new report.
Overall, manufacturers are confident about their business growth, 79% predict their turnover will increase over the next five years, and by an average rate of 12%, a new survey from Lloyds Bank has found.
Of those surveyed who export, more than half say demand for their goods overseas is increasing.
Even with continued UK-EU tensions fuelled by Brexit, a third of manufacturers say that the EU will remain their key growth market for the next five years, followed by China (15%) and North America (13%).
The EU accounts for just under half of all British exports every year. According to recent ONS data, UK exports of goods and services in the 12 months to May 2019 increased by 4.0% to a record high of £647.1bn, with goods exports increasing by 4.7% to £357.1bn.
Brexit threat continues
“UK manufacturers have a proud history of high-quality products and innovation, which could be one of the reasons for the growing demand from overseas,” said Steve Harris, Head of Manufacturing for Large Corporates at Lloyds Bank Commercial Banking.
But almost half (47%) of firms said the impact of the UK leaving the EU is a threat to growth, and is a greater threat to future prosperity than cost pressures (45%), political uncertainty (44%) or weak growth in the UK economy (43%).
Business leaders now say their strategy for growth focuses on boosting research and development budgets, which they plan to increase by an average of 13%.
Alongside this, manufacturers plan to accelerate new product development to power growth, as well as making investments in IT, new equipment and increasing capacity.
The report explains a fifth (20%) of manufacturers believe improving productivity will support growth, together with investing in their existing product range (20%) and entering new export markets (18%).
Sustainability – not just a “buzz” word
The report also found that sustainability is high on the agenda for manufacturers, with two-thirds saying they will invest in sustainability in the next two years.
This will be achieved by reducing waste or recycling more (50%), cutting their energy use (44%), encouraging office employees to reduce energy use (43%), changing manufacturing materials or processes (31%), sustainable procurement (26%), cutting back on travel (25%) and making distribution fleets greener (22%).
Sustainability offers benefits to the environment but also to profit margins as Professor Steve Evans, Director of Research at the Centre for Industrial Sustainability, University of Cambridge, explained in his recent article for TM.
Harris added: “Sustainability is not just a buzz word, it’s a social expectation and a reality for businesses today. Whilst this could be seen as a challenge for manufacturers, they’re seeing it as a real growth opportunity and are grabbing it with both hands.”
“Their commitment to capitalising on opportunities that exist in a modern global economy must be recognised, and it reaffirms why we are committed to supporting manufacturers with the resource and expertise they need to grow their business.”
The report from Lloyds Bank surveyed 200 manufacturers with a turnover of £500m or more.