Britain’s manufacturers have seen output surge by three times faster than orders in the last quarter, while there are the first signs business confidence indicators are starting to show a more stable economic scenario after the global uncertainty and domestic political chaos of the last few years.
The findings come in the Q4 Manufacturing Outlook survey published today by Make UK and business advisory firm BDO. According to Make UK, it is extremely rare for output to surge faster than orders to this degree, the last time being when companies were stockpiling ahead of a potentially ‘no deal’ scenario at the end of 2019.
The survey also shows that export orders surpassed domestic orders for the first time in four years suggesting that companies are taking advantage of either faster growing or new markets, in contrast to the anaemic UK economy. Recruitment intentions have also rebounded after the blip in the last quarter and are especially strong looking forward. However, capital investment plans weakened although they remain at reasonable levels historically.
Fhaheen Khan, Senior Economist at Make UK, said:
“After the economic and political shocks of the last few years there is some semblance of stability returning for manufacturers. While growth is not exactly supercharged, the positive announcements in the Autumn statement can at least allow companies to plan with more certainty without having to constantly fight fires.”
Richard Austin, Head of Manufacturing at BDO, added:
“Manufacturers have been calling on the Government to provide targeted support to help stimulate growth and investment for some time, and it feels like some headway was made in last month’s Autumn Statement. Firms are ending the year on a relatively stable footing with some certainty at least in the tax environment to support their long-term investments in the UK. The hope now is that the sector can pick up the baton and drive growth.”
According to the survey, the balance on output increased to +20% from just +3% in Q3 and is expected to remain at a similar level in the next quarter at +15%. Total orders also increased to +7% from a negative balance of -1% in Q3. This leaves output increasing by almost three times the rate of orders in the last quarter which according to Make UK is highly unusual, potentially indicating re-stocking or stockpiling ahead of next year.
In the last quarter export orders increased to +10% from a negative balance in the last quarter of -3%, while UK orders remained flat at +0%. This is the first time export orders have exceeded UK orders since the pandemic, although looking forward to the next quarter export and UK orders are at similar levels of +7% and +8% respectively.
The scramble to attract and retain talent also shows no signs of abating, with recruitment intentions increasing from a blip of -1% in the last quarter to +6%, and gaining strength to +19% in the first quarter of next year. Apart from the start of the pandemic, employment balances have largely been at elevated levels since the EU referendum, indicating that skills shortages and vacancies in manufacturing are now structural. Investment intentions are at +10% which is weaker than last quarter but is continuing the trend of being positive in every quarter bar one since the beginning of 2021.
In terms of overall output this year Make UK and BDO have upgraded their forecasts for manufacturing growth in 2023 from -0.5% to +0.8%. However, growth in 2024 is forecast at just 0.1%. GDP is forecast to grow 0.6% in 2023 and 0.4% in 2024.
The survey of 303 companies was conducted between 25 October and 29 November.
