West Midlands manufacturing recovery continues despite challenges - survey

West Midlands manufacturers are continuing to see a rebound in activity in the second quarter of the year as the domestic and global markets have improved, easing fears of a significant recession for industry this year.

The findings in the Make UK/BDO Q2 Manufacturing Outlook survey show a marked pick up in the first six months of the year on the picture in the final quarter of 2022, echoing the gradual improvements in the economy overall.

Most notably, the improvement is being largely driven by continued recovery in the automotive sector which is so important for the Midlands economy overall and which saw the tenth consecutive month of registrations in May.

This investment has been helped in particular by the easing of chip shortages and improvements in supply chains from the Far East, both of which had hampered production despite increased demand.

Both output and orders picked up in the West Midlands with an especially strong order balance for the next three months of +20 per cent. Looking forward both these are set to increase further in the next quarter with orders especially strong at +44 per cent, a figure extremely high by historical averages.

In line with this improving picture companies increased their intentions to recruit with the prospects for recruitment in the next quarter increasing substantially to +36 per cent. Investment intentions are also looking extremely positive for the next quarter.

In terms of overall output this year Make UK and BDO are forecasting a contraction of 0.3 per cent, although this is a significant improvement from the contraction of -3.3 per cent made in Q1 and the -4.4 per cent forecast at the end of last year. However, Make UK is maintaining its previous forecast for growth of just 0.8 per cent in 2024. UK GDP growth is at 0.4 per cent for 2023 and 1.3 per cent for 2024.

Charlotte Horobin, Midlands director at Make UK, said: “Manufacturers in the West Midlands 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 and so long as there is an absence of an overarching industrial strategy growth prospects will remain anaemic at best. ”

Jon Gilpin (pictured), head of Manufacturing at BDO in the Midlands, said: “Despite the first half of the year seeing some pressures easing for local manufacturers - and the short-term prospects looking healthier for it - there are longer-term systemic challenges in the UK market, with built-in inefficiencies that need to be addressed urgently in order for manufacturers to effectively plan and invest for the future. ”