Manufacturing prospects now ‘look bleaker’

By Michael Stones contact

- Last updated on GMT

The growth forecast for UK manufacturing was halved
The growth forecast for UK manufacturing was halved

Related tags: Industry, Uk

UK manufacturing prospects look bleaker now than at the beginning of the year, according to a new survey, which includes food and drink manufacturers.

The growth forecast for the sector had halved, as global economic uncertainty took its toll on manufacturers’ confidence, claimed the latest quarterly Manufacturing Outlook survey.

Published by the manufacturers’ organisation EEF and law firm DLA Piper, the report slashed the  2015 manufacturing growth forecast to 0.7%. Brighter prospects for domestic consumer demand and construction activity were not enough to offset the impact of global negative factors.

‘Rollercoaster of risks’

EEF chief economist Lee Hopley said: “While UK data has continued to point to solid growth, UK manufacturing is having to contend with a rollercoaster of risks from the rest of the world and the white-knuckle ride is starting to take its toll.

“We’ve seen the future of the Eurozone on the line once again, turbulence and uncertainty over China and Greece and, of course, oil and gas are still a concern. Against this backdrop it’s no surprise that confidence is faltering and UK manufacturers are feeling less optimistic about their growth prospects for next year.”

All of the UK manufacturing’s key indicators – particularly output and orders – had deteriorated, hit by falling demand at home and abroad.

Export orders had dropped to a six-year low in response to continued problems in Europe over the summer and the slowdown in emerging markets.

‘Dipped rather than nose-dived’

Brakes on manufacturing

  • Eurozone on line again
  • Worries about great fall of China
  • Doubts about Greek economy
  • Oil and gas still a concern

But confidence had “dipped rather than nose-dived”, ​said Hopley. “If the global drag lets up anytime soon then UK manufacturing should very swiftly get back into its previous stride. Industry and government must continue to work closely together to help offset the risks and support investment and innovation in the sector.”

More than a third of companies reported signs of improving demand in Europe – the UK’s biggest export market. However, the proportion of companies seeing growth opportunities in Asia had fallen.

Two key exceptions to the downward trend were: manufacturers’ investment and recruitment intentions. A net 6% of firms were looking to hire during the next quarter and a balance of 2% planned to boost investment.

Manufacturing sectors which performed slightly better than average were transport and electronics, while electrical and mechanical equipment and non-metallic minerals were worse than average.

DLA Piper head of the manufacturing sector Richard May said: “As we start to edge towards the end of the year the outlook for the UK manufacturing sector is somewhat bleaker than at the beginning of 2015.”

But while business confidence had dipped, he added: “We can remain hopeful that prospects for the sector will pick up again.”

Meanwhile, read the results of the Food Manufacture Group’s recent exclusive survey of food and drink manufacturers’ business plans here​.

Quarterly Manufacturing Outlook survey

  • All major survey indicators down on the past quarter – output and orders turn negative and output falls to lowest level since the fourth quarter of 2009
  • Domestic demand weakens further with second consecutive negative balance
  • New export orders edge down to six-year low and pressure mounts on export margins
  • Recruitment and investment plans hang on to positive ground
  • Confidence for the year ahead again edges down
  • Manufacturing growth forecast revised down to 0.7% from 1.7% in January 2015

Source: EEF and DLA Piper

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