West Midlands manufacturing recovery continues despite potential downturn ahead - survey

West Midlands manufacturers are continuing to see positive activity in the second half of the year, despite fears of a potential downturn ahead amid slowing consumer spending and demand overseas.

Most notably, the positive picture continues to be driven by a strong pick up in the motor vehicles sector amid an easing of chip shortages and improvements in supply chains from the Far East. The latest figures published last month showed sales up by a quarter compared to August 2022.

Both output and orders remain strong in the West Midlands with an especially strong order balance of +41 per cent. Looking forward, both these are set to increase further in the next quarter with orders especially strong at +37 per cent, a figure still extremely high by historical averages. This was driven primarily by strong export orders (+32 per cent).

This continuing positive picture is leading continued recruitment in the region, while investment intentions also remain positive at +17 per cent, significantly above the national picture, possibly reflecting the introduction of full expensing announced in the Spring.

In terms of overall output this year Make UK and BDO are forecasting a contraction of -0.5 per cent, slightly worse than the -0.3 per cent forecast in Q2. However, Make UK downgraded its forecast for 2024 to growth of just 0.5 per cent, down from 0.8 per cent in Q2.

Chris Corkan, midlands region director at Make UK, said: “Manufacturers are seeing a mixed picture as the potent cocktail of rising interest rates, cost of living and slowing overseas markets bites hard.

“While it's clear the Chancellor doesn't have a financial war chest to try and boost growth he should use his Autumn Statement to bring forward carefully targeted measures which could make a difference to companies' efforts to boost skills and productivity. He should use whatever is available to get the best bang for his buck.”

Jonathan Lanes (pictured), head of manufacturing at BDO in the West Midlands, said: “Buoyed by strong automotive demand, West Midlands manufacturers are bucking the national trend reporting positive results as they enter the final quarter of the year.

“Meanwhile, UK-wide, businesses are feeling the pinch of the Bank of England's plans to stamp out inflation.

“In the absence of an overarching industrial strategy from government, we can expect manufacturers to tighten their purse strings, protect margins and focus on building operational efficiencies over the next few months.”