In the rush to get things out the door, you could be forgiven for missing the latest set of GDP data released last week. But if your order book looks busier than ever right now, then the cause may well be found within the figures. Martin Hurworth explains why.
Looking over the latest set of GDP figures, of most interest to industry was that manufacturing output grew by 0.7% in the three months to January; the fastest rate since the vote to leave the EU. That’s better than the economy as a whole, which grew 0.6% – the same as the previous two quarters; and stronger than both the agriculture and construction sectors.
For 2016 as a whole, the industry grew by 0.3% – not exactly earth moving, but far stronger than many (myself included) had feared in the run up to the referendum. So sales are up, the makers are marching and the UK’s on its way to the sunlit uplands once again. Well not entirely. Dig a little deeper past the headlines and the GDP figures expose some big issues that still need to be addressed.
Services: the fly in the ointment
Firstly, while the UK’s overall GDP is now estimated to have increased by 2% last year, almost all of that rise was down to growth in the service sectors; particularly retail and travel which grew by a huge 7.3% in one quarter. Manufacturing might be up, but any growth is being offset by the rising cost of oil and gas, so we are essentially running to stand still.
That overall rise of 2% was the slowest for three years (2.2% in 2015 and 3.1% in 2014), potentially a cause for concern if that trend isn’t reversed. Productivity, although up 1.4% last quarter compared to the year before, still lags far behind other big economies. And while a growing economy is good news for most, manufacturing’s 0.3% rise last year comes on the back of a 0.2% fall in 2015, which means we’re pretty much where we were two years ago.
So that’s all the GDP figures out of the way. Where do we go from here? Well the world is a very different place now compared to two years ago, and change always breeds opportunity.
And although it’s too early to say with confidence that Brexit has been good for business, last week’s solid GDP figures and the latest CBI Industrial Trends Survey, both point towards a possible Brexit boom.
Turning industrial strategy into reality
We don’t know yet what deal the Prime Minister will bring back from Brussels once negotiations are done, but thanks to the government’s Industrial Strategy green paper which was released last Monday (January 23), we have a better idea of what manufacturing in post-Brexit Britain could look like.
On the off chance that you’ve not read the full 132-page report yet, the ‘ten pillars’ sum it up. Investment in R&D, infrastructure upgrades, support for businesses to scale up and steps to tackle STEM shortages. If the government can make it happen then we will all feel the benefits, but only if it turns strategy into reality, and fast.
They could go further, too. Lord Bilimoria’s recent call for the government to set a target for manufacturing as a percentage of GDP would redress our over-reliance on services, while looking ahead to the Budget in March, more measures for the makers would help turn good news into great news next time around.