British manufacturing rebound eases recession fears

British manufacturers are continuing to see a rebound in activity in the second quarter of the year, easing fears that the sector could face a significant recession.

A survey published by Make UK showed that the transport and electronic sectors were doing particularly well, reflecting the continued recovery in the aerospace sector with the increase in passenger miles, together with a spate of large orders for new aircraft over the last year.

Air India, for example, announced plans to buy 470 jets from Airbus and Boeing in February amid hot competition from domestic flight provider IndiGo. Airbus makes the wings and fuel systems for its A350 and A320 planes, which were part of the deal, in the UK.

MakeUK said it also recorded strong balances for electronics manufacturers as companies invest in digitalisation and extra capacity to counter labour shortages. The investments are now translating into “consistently strong balances” for the South-East where electronics is the second-largest industrial sector in the region, it said.

However, despite conditions remaining positive, the forecasting suggests a slight contraction for manufacturing in 2023 overall, despite improvements from the significant contraction that Make UK predicted at the end of last year.

James Brougham, senior economist at Make UK, said: “Manufacturers are seeing a gradually improving picture, but the word ‘gradually’ is doing a lot of heavy lifting. However, companies are at least seeing a relative period of stability after the political and economic turmoil of the last few years when they have spent most of their time firefighting.

“Substantial challenges still remain, however, and so long as there is an absence of an overarching industrial strategy growth prospects will remain anaemic at best.”

Richard Austin, BDO’s National Head of Manufacturing, says the burden on manufacturers still lays heavy: “Despite the first half of the year seeing some pressures easing, there are longer-term systemic challenges in the UK market, with built-in inefficiencies that need to be addressed urgently in order for UK manufacturing to effectively plan and invest. 

“Supply chain pressures, for example, are an endemic issue for the businesses we talk to, particularly medium-sized firms. They are facing continued disruption and increased costs, at home and abroad, with many choosing to onshore operations but facing major barriers in doing so.”

The survey also shows that, in the face of continued skills shortages and strong labour demand, wage growth shows little or no sign of easing.

Last month, Stellantis – one of the UK’s largest automakers – warned that it could be forced to close some of its factories if the UK does not renegotiate the current Brexit deal.

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