Latest industry production figures reveal a mixed bag

Posted on 9 Dec 2014 by Jonny Williamson

Index of Production (IoP) figures, released today, show total production output to have increased by 1.1% between October 2013 and October 2014, with manufacturing (the largest component of production) growing by 1.7%.

The monthly estimates from the Office for National Statistics (ONS) show increases in eight of the 13 manufacturing subsectors compared with a year ago, with the largest contributor being the manufacture of food products, beverages and tobacco.

However, compared to the previous month, ONS estimates that total production in October 2014 decreased by 0.1%, with manufacturing the only one of the four main components to fall, decreasing by 0.7%.

The main manufacturing components contributing to this fall are cited as being computer, electronic & optical products, basic pharmaceutical products & pharmaceutical preparations, and chemicals & chemical products.

Highlighting the manufacture of electrical equipment such as electric motors, generators, transformers, batteries and lighting, the office said that the sub-industry is typically “project driven,” especially in the case of producing the larger products, with a “notable proportion of turnover generated from milestone payments that can be irregular and non-seasonal.”

Accordingly, the office described the sub-industry as historically “volatile” compared to other manufacturing sub-industries.

In regards to the pre-downturn GDP peak in Q1 2008, ONS concluded that for the three months to October 2014, production and manufacturing figures were down 10.4% and 5.5% respectively.

Commenting on the October 2014 IoP figures, Darren Jukes, manufacturing leader at PwC, said: “[The year-on-year increase] is welcome news for the success and re-growth of the manufacturing industry and for the UK economy, as well as for the 8% of UK workers in the industry and the Chancellor who welcomed growth in the sector in last week’s Autumn Statement.

“A key focus on R&D and labour productivity continues unabated in the sector, already well known for its innovation. Our industrial manufacturing clients are generally optimistic about 2015 and the growth available for their businesses. However, despite a mood of cautious optimism on the skills shortage in the sector, there remain concerns about finding the right talent and skills in the UK workforce to enable manufacturers to grow.

“Addressing the skills shortage is essential if manufacturers are to capture the opportunities and ultimately re-balance the percentage of UK workers who work, and aspire to work, in the sector.”

Head of Manufacturing at Barclays, Mike Rigby noted: “With the prospect of another year of restrained growth, low interest rates and benign input prices globally, manufacturers’ New Year resolutions must surely focus on realising new export markets, investment in R&D and new machinery as we enter 2015.

“Against a backdrop of sterling appreciation and a shortage of both skilled and unskilled labour, those that have the confidence to invest will be the ultimate winners in this increasingly important market place.”