UK Manufacturing Looking Positive for 2017

This is a great time for catering equipment manufacturing. Currently representing 14% of all business investments, UK manufacturing accounts for an estimated 68% of all new research and development. Domestic and international new orders and production growth numbers for December 2016 reveal a rosy outlook and the sector continues to pay well. With the latest IHS Market/CIPS Purchasing Managers’ Index (PMI) showing a 30-month high, UK manufacturers are confident for the future. Projections for 2017 are favourable. Over the next quarter, output growth is expected to remain steady or increase, with 30% of companies citing an expected rise.

The Office of National Statistics (ONS) reports, the industrial sector has grown steadily by an average of 1.4% annually for the last 68 years. This growth can be attributed to a skilled workforce, improvements in automation, high productivity products, and continued investment in research and development. The increasingly integrated global economy also plays a role; collaborative innovations and growing demand for export allow the sector to thrive despite concerns over Brexit.

The CBI Industrial Trends Survey found that in the 505 firms surveyed, reported export orders are at a two year high. They speculate that favorable exchange rates resulting from the recent depreciation of Sterling may be behind increases in overseas demand. Manufacturing output, although slightly weaker than in July, grew slightly while the numbers of total orders remained firm overall. Losses in the EU market were easily made up by expanding exports. Of the 17 manufacturing sectors, chemical manufacturing contributes a little more than half of the export market, but the majority of sectors are reporting steady or strengthening export orders. More than 20% report their orders above usual numbers, up 1% since July. British food and drink exports £12.8bn+ annually. British steel adds £9.5bn per year to the economy and (citing numbers from 2013) exports £4.9bn in product.

Should your Business be Exporting?

UK manufacturing contributes 45% to total exports. Is your business ready to deal with the demands of exporting? If you’ve been considering getting into exports, now is a great time to make that move. Here are some things to consider:
  • What benefits will you gain from exporting?
  • Do you have in place the resources to take on the challenges and risks involved?
  • What changes might overseas customers expect in terms of product or service?
  • Will your foreign target market have different compliance standards, and can you meet them?
  • Can you partner with overseas businesses for greater mutual success?
  • Have your competitors already saturated potential markets?
  • Is your current market research broad enough to encompass global trends, or should you hire consultants?
Research shows that businesses are 11% more likely to succeed if they position themselves in the international market, and typically see a better than 30% increase in productivity within the first year of beginning exports. While there is no guarantee that every business will succeed, current economic indicators suggest that now is an excellent time to explore new markets.

On the international stage, British manufacturing moved up to rank the 9th largest contributor to global manufacturing production. Manufacturing under-girds growth within the UK, and is expected create more jobs in 2017. Research from the job site CV-Library lists manufacturing, tourism, catering, marketing, and design as top employment growth sectors for 2017. Managing Director, Lee Biggins stated, "These sectors are some of the UK's core industries and key drivers behind our economy, so it's fantastic that there are some great job opportunities for candidates." This comes as the largest manufacturing sector, food and drink, which at present directly employs more than 400,000 is predicted to need an additional 110,000 workers to fill new sector jobs by 2022.

Predictions for increased job creation in 2017 are easily supported by 2016 statistics which saw consecutive expansion for the last five months, accelerating jobs growth to levels not seen in the last 14 months. Large-scale producers noted a moderate staffing increase, while SMEs recorded striking escalations. Increasing confidence in the UK economy assisted by the expanding export market puts British manufacturing in a stable position making it an attractive employment opportunity.

Currently employing 2.7 million people the UK manufacturing sector is said to contribute 10% of GVA. Some analysts make the claim that that 10% share would be more realistically reported at 19% if service sectors were included. Specifically referring to areas such as cleaning, catering, security, etc. which are reliant on manufacturing for their existence but are not currently included as part of the GDP input for manufacturing.

The declining Pound along with uncertainties over British withdraw from the EU appear to be impacting the cost of importing raw materials. As a result prices are expected to increase. In numbers the highest since February 2015, manufacturers report that they expect raise prices over the next fiscal quarter. Head of economic analysis and surveys for CBI, Anna Leach, is quoted as saying: “It’s good to see manufacturing output growth coming in stronger than expected, and some signs that the fall in Sterling is helping to bolster export orders. But the Pound’s weakness is a double-edged sword, as it benefits exporters but also pushes up costs and prices.”

We have already seen steep inflation rates for input costs being passed on to product prices which remain elevated. Selling prices for consumer, intermediate and investment goods in December rose for the eighth month in a row. Increasing prices have not slowed output volumes, however, with 34% of businesses reporting increases and only 23% reporting a decrease; showing a higher than expected overall increase of 11% in output volumes. With the increase in international and domestic orders concerns over inventory are not severe. While 10% of businesses feel that they currently have inadequate stock to meet expected demand, most report confidence in their current levels. Indications that UK manufacturing is poised to increase market share in 2017.

Further Information...

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