There has been much positive news about manufacturing in the past few quarters, not just in the UK, but across every significant international market. Stephen Phipson surveys a buoyant market, that still has real challenges on the horizon.
As we begin the year, our latest Executive Survey, shows UK manufacturing companies expect to be busy again in 2018, with demand from domestic and export customers forecast to be up on last year.
Encouragingly, all UK manufacturing sectors seem to be ready for growth, with those manufacturers making investment being the most positive about their sales outlook.
This comes on the back of expanding global manufacturing activity and advances in technology creating an increased appetite to invest.
These expectations for growth look well founded given the upbeat assessment of the business investment outlook in many parts of the world for the next couple of years.
Inevitably, this will be driving companies to bring more skills into their workforce.
As far as risks are concerned, front of mind are issues that could go wrong in burgeoning export markets, with further action in the US to increase protectionism, or wobbles in big emerging economies such as China, having the potential to knock positive sentiment off course.
This article first appeared in the February issue of The Manufacturer magazine. To subscribe, please click here.
There are company-level risks and challenges too, and these will need a plan of action from manufacturers. Some of these concerns are connected with the strong pick-up in activity that firms have been experiencing.
Half of the companies in our survey are worried about having insufficient capacity to meet demand, and slightly more are worried about significant upward pressure on pay.
Another rapidly emerging risk is the threat from cyber-security breaches. Such worries are not confined to big corporates, some of whom have hit the headlines in recent times.
Firms right across the supply chain not only have cyber-security on their radar, but are putting in place plans to mitigate against potential breaches.
It also goes without saying that manufacturers have a host of Brexit-induced risks on their radar.
The top one remains concerns about exchange rate volatility and associated impacts on input costs, a sentiment which has seen no shift compared with last year’s risk rankings, and which is unlikely to ease anytime soon.
Additionally, many worry about a major customer relocating from the UK as a result of Brexit, and an increase in EU nationals leaving, which is significant for a third of companies.
Despite these risks, a majority of companies continue to see the UK as a good place for their manufacturing operations in the year ahead, though this has slipped a little in recent years, and is a factor government cannot afford to ignore with an Industrial Strategy on which the ink is barely dry.
Furthermore, there are no indications, as yet, that 2018 will see manufacturers putting their investment elsewhere in response to Brexit or exchange rate movements.
The majority of companies will be making the necessary investments to fulfil growing order volumes and, for the small group with relocation plans, it is just as likely that reshoring back to the UK is being considered as offshoring.
The outgoing CEO of EEF, Terry Scuoler, believes the weakened position of the Tory government offers manufacturers a much better chance of fighting for a favourable Brexit.
He recently sat down with The Manufacturer’s Editorial Director, Nick Peters, to discuss this, and the state of UK manufacturing, as he made preparations to step down at the end of 2017.
Click here to read the interview.