Region 's manufacturers see tough year ahead - survey

Manufacturers in the West Midlands are looking at a tough twelve months ahead, with the sector likely to contract in the face of a deteriorating economic outlook at home and abroad according to a survey published today by Make UK and business advisory firm BDO.

The forecast was made in the Make UK/BDO Q4 Manufacturing Outlook survey which shows manufacturing contracting by -3.2 per cent in 2023.

This comes on the back of a forecast -4.4 per cent contraction this year, although Make UK stressed the number for this year is relative to a very strong 2021 which reflected the pandemic bounceback.

However, given Make UK has consistently been revising down its forecasts for manufacturing growth in 2022 throughout this year from 3 per cent in March to 1.7 per cent in July, 0.6 per cent in September and now, a contraction of -4.4 per cent (1), it highlights the extent to which conditions for the sector have weakened significantly, especially in the final quarter of the year.

In the last quarter, output in the West Midlands held up in line with the national picture at a balance of +4 per cent, although it is forecast to drop substantially in the next quarter to a balance of -31 per cent, again in line with the national picture.

While the Chancellor took some welcome measures in the Autumn Statement to help ease the short-term pressures on business, Make UK said more measures will be needed if economic prospects continue to weaken. These should include:

• Alleviating labour shortages with temporary easements to the migration system and ensure manufacturers have the funds to train and retrain employees by expanding the tax exemption for work related training into a wider Training Investment Allowance.
• Tackling the increased cost to business by extending business rates reliefs for retail hospitality and leisure to manufacturing
• Spurring on much needed immediate investment by allowing first year allowances
• Re-thinking recent decisions on the R&D tax relief for small businesses to ensure manufacturers are not deterred from investing in critical innovations

Charlotte Horobin (pictured), regions director for Make UK in the Midlands said: “There is simply no sugar-coating the outlook for next year and possibly beyond. Even for a sector as resilient as manufacturing these are remarkably challenging times which are testing even the best and most successful of companies to the limit.

“The bigger issue is that the UK risks sleepwalking into an acceptance that little or no growth is the norm. Government needs to work with industry as a matter of urgency to deliver a long-term industrial strategy that has growth at national and regional levels at its heart. ”

Jon Gilpin, Head of Manufacturing at BDO in the Midlands, said: “Without a commitment for long term support from the government, we will see a manufacturing sector which is reluctant to invest and adopt new technologies, such as automation, as businesses will hold onto funds to keep the doors open in the short term. Such an environment of uncertainty will have a negative impact on the future competitiveness and viability of UK manufacturing.