The UK manufacturing sector showed a resilient performance in February. The downturn in output halted, as stabilising client demand and improved supply chains boosted production. Inflationary pressures also eased further, with costs rising to the least marked extent since July 2020.
Industry reaction
Following the release of the latest UK Manufacturing PMI today, Guy Hodgkinson, partner at MHA, calls for the government to increase R&D investment and create a clear strategy for manufacturing to flourish as we move into 2023:
“It is no secret that rising energy, material and staff costs have overburdened the manufacturing sector in the last year. Although order books remain strong and companies have managed to stay afloat the government seems unwilling to support the sector as it looks to balance the budget.
“Innovation is a proven method for increasing GDP so it is disappointing that the R&D scheme and the super deduction are being reduced (in April 2023). The UK has to again become attractive for investment to stimulate growth.
“For this to happen in manufacturing, the government needs to create stability and develop a clear strategy, against a backdrop of political volatility which has been very damaging to international investment. In the short-term manufacturers will have to continue to be resilient whilst making sure they collaborate with as many businesses as possible to ensure the UK maintains its reputation for quality and innovation.”
Maddie Walker, Industry X lead for Accenture in the UK, said: “It’s reassuring to see signs of growth returning to UK manufacturing after the gloom which dominated the sector last year. News that the UK may avoid a recession has buoyed the sector and recent foreign investments are a vote of confidence in the UK’s manufacturing capabilities for the future. As economic revival continues, we will hopefully see further growth in the coming months. While the road to full recovery will be a long one, it will take continued investment in the right digital technologies, alongside ensuring new recruits have the right skills for modern manufacturing. It’s this that will help bolster the sector’s resilience and ensure this growth is sustained.”
Andy Hart, manufacturing and industrials relationship director at Lloyds Bank, said: “Manufacturers are currently facing a twin reality. With bullish order books suggesting that supply chain challenges have past their peak, business to business trade is strong. However, a persistently tight labour market and prolonged cost pressures may hold back the sector from returning to growth.
“There has been less confidence when it comes to demand for consumer goods over recent months, but a return to growth here is encouraging to see. Household budgets are impacting discretionary spending, and while inflation is easing from its peak, consumers are still feeling the pinch from prices increasing faster than wages. Consumer spending pressures will continue to curb demand for the next few months at least.”
Michael McGowan, Managing Director, Bibby Foreign Exchange at Bibby Financial Services commented: “Today’s improvement in the manufacturing PMI data, along with the news that UK manufacturing production has risen for the first time in eight months, highlights the sector’s resilience in spite of a myriad of challenges. It signals that perhaps a recession may not be as inevitable as once assumed, and the previous downturn is now stabilising.
“Yet, manufacturers continue to face an anxious few weeks - with the new Brexit deal front of mind. And although some manufacturers will be relieved that the cost of raw materials has reduced due to the strength of the Pound off the back of the Northern Ireland Brexit deal, it will be exporters who feel most vulnerable as costs increase in the immediate term.
“It’s therefore more critical than ever for manufacturing businesses to effectively navigate currency fluctuations during this uncertain time. Prioritising foreign currency requirements within financial planning processes will be fundamental if we are to see the sector’s resilience and confidence continue to improve.”
