Improved exports sees positivity rise for UK manufacturers

Posted on 15 Jul 2015 by Jonny Williamson

Overall business confidence has risen across the UK's manufacturing sector in the past six months, according to a new report from Lloyds Bank.

The Bank’s latest Business in Britain report states that the outlook among manufacturers is underpinned by their expectations of an improvement in exports, as well as an anticipated increase in investment levels.

UK Overseas Export
The overall outlook is strong for the UK’s manufacturing sector, despite pressures such as uncertainty in the Eurozone.

According to Lloyds Bank, the twice-yearly report gathers the views of 1,500 UK companies, including more than 200 manufacturers (predominantly SMEs), and tracks the overall balance of opinion on performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

Since the last report in January 2015, business confidence in manufacturing has grown by seven points to 51%, largely driven by firms’ expectations of orders and profits, reflecting a more bullish growth outlook for the rest of the year.

Although the latest confidence reading is down from the survey’s high of 58% 12 months ago, it remains well above the long-term national average of 23%.

More than a quarter (26%) of manufacturers said that weaker UK demand poses the greatest threat to their business in the coming six months, which could explain why many expect to look to global markets for continued growth and sales.

The net balance of exporters expecting an increase in total exports across the globe has risen by eight points to 50%; the biggest increase in export expectations since January is to Europe – despite the ongoing uncertainties in the Eurozone.

The net balance of manufacturing exporters expecting an increase in trade with Europe has grown by 11 points to 30%, while emerging economies such as the Middle East, Asia and Africa were close behind.

Atkinson, David - Lloyds Bank
David Atkinson, head of manufacturing (SME), Lloyds Bank Commercial Banking.

Head of manufacturing (SME) at Lloyds Bank Commercial Banking, David Atkinson commented: “Business confidence has remained relatively strong and steady in manufacturing, with encouraging expectations for sales, orders and profits for the rest of the year.

“This has been underlined by the bounce-back in exports to Europe as well as companies’ intentions to grow their presence further on the international stage.”

Manufacturing firms’ investment spending trends are also anticipated to improve in the next six months as the balance of businesses planning to increase capital expenditure has risen by five points, from 19% to 24%.

When asked how much they plan to invest in the next six months, 21% said they had no plans to invest, although 7% of firms said they plan to invest more than £1m.

Atkinson continued: “Businesses remain eager to invest in infrastructure and staff for the long term and while certain challenges remain on the horizon – such as uncertainty in the Eurozone, a potential rise in interest rates and inflationary pressures – the overall outlook is strong for the UK, particularly in the manufacturing sector.

“We have pledged to make £1bn of funding support available for manufacturers every year until 2017, in order to drive growth. Businesses have good reasons to remain confident as the long-term health of the UK continues to improve.”