UK manufacturers picking up pace faster than expected

Make UK, which represents the manufacturing sector, said that growth prospects are positive for the rest of the year based on the results from a recently conducted survey.

It showed that the Covid-19 pandemic hit the sector hard, resulting in a 10 per cent fall in output in 2020.

However, as the vaccine programme gathers pace and major markets recover, Make UK has upgraded its growth forecast for 2021 from 2.7 per cent to 3.9 per cent. While this positive trend has been hailed by the body, it noted that the figures also suggest it will take some time to recover the 10 per cent fall in output seen last year.

The survey also highlights that while UK orders have risen, export orders have remained negative despite a significant pick up in manufacturing in the EU.

This would suggest that both UK and EU companies have yet to come to terms with the new post-Brexit trading arrangements, Make UK said, adding that it believes they are causing issues that go beyond ‘teething problems’. Last week, Make UK published figures showing three-quarters of companies were facing delays at ports.

While investment intentions are also still negative, they are significantly improved on the last few quarters and Make UK hopes that the Budget announcement of a ‘super-deduction’ tax will provide a boost.

Make UK added, however, that the UK has faced a structural problem with longstanding, relatively low levels of investment and that, given the incentive only lasts for two years, more longer-term measures will be required to make a real step change.

“After the seismic shock to the sector last year, manufacturers are now beginning to move through the gears and accelerate into recovery as demand at home increases and major markets also begin to pick up,” said Stephen Phibson, CEO, Make UK.

“Looking forward, we are now at an economic crossroads. We have a major opportunity for Government and Industry to work together on a long-term vision which ensures we take advantage of the acceleration in technologies, our capacity for innovation and world-class academic and science base. Future generations will not look back kindly if we do not grasp it.”

He added that the proposed two-year window for the Chancellor’s super-deduction tax was “arguably too short” as manufacturers need more certainty over the longer term.

The survey of 314 companies was conducted between 27 January and 17 February 2021.