20 March 2023
West Midlands manufacturers have seen a mixed picture in the first quarter of the year although the trends are far more improved since the second half of last year, easing fears of a significant recession for industry in 2023.
The findings in the Make UK/BDO Q1 Manufacturing Outlook survey show a marked pick up on the picture in the final quarter of 2022. The figures echo the gradual improvements in other data such as the UK and European PMIs which are now only just in negative territory, as well as a strong pick up in demand from China.
According to Make UK and BDO this mixed picture reflects the ongoing difficulties being experienced by the automotive sector and the ripple effects being felt down the supply chain amid the transition to electric vehicles.
Both output and orders picked up in the region with an especially strong order balance of +34 per cent, a pattern which is being reflected across the UK regions.
This was driven primarily by export orders which ties in with the fact the domestic market remains weak. However, despite this improving picture employers’ intentions to both recruit and invest remained at weak levels.
However, despite the improvement this quarter, Make UK is still cautioning against the worst of conditions being over as the predictions by West Midlands manufacturers for the next quarter are far weaker with more companies forecasting UK and export orders forecast to fall.
As a result of this mixed picture and, the lack of any significant upturn in growth, Make UK is still forecasting a contraction for manufacturing in 2023 as the substantial challenges the sector is facing show few signs of abating.
Charlotte Horobin (pictured), Midlands director at Make UK, said: “Manufacturers in the West Midlands have seen a rebound at the start of the year as conditions have improved in their major markets and, business confidence has improved.
“However, one swallow doesn’t make a summer and it is far too early to say the worst has passed given the significant challenges the economy faces. However, the Budget should help boost investment in the short to medium term although ideally, full expensing should be made permanent to better reflect the investment cycle for manufacturers.”
Jon Gilpin, head of manufacturing at BDO in the Midlands, added: “The region has seen a good start to the year, with both output and orders picking up. However, inflationary pressures are still very evident for UK manufacturers with increased costs still being passed on.
“The latest government announcements do little to address the current threats to UK manufacturers resulting from the heavy burden of energy costs. Manufacturers and investors need consistency and commitment to long-term support to shape their next steps.”
In terms of overall output this year Make UK is forecasting a contraction of -3.3 per cent (a slight improvement from -4.4 per cent forecast at the end of last year) and growth of just 0.8 per cent in 2024.