UK manufacturing surges but 'big challenges' remain - survey

The UK manufacturing sector surged in the third quarter, a survey showed on Monday, as the economy continued to emerge from the pandemic.

According to the latest Make UK/BDO manufacturing outlook survey, the output balance was 42% in the third quarter, up from 36% in previous three months and the highest in the survey’s 30-year history.

Total orders improved to 49% from 34%, boosted by significant demand both domestic and overseas. Domestic orders increased to 48% from 27% in the second quarter, while export orders rose to 37% from 22%.

Investment intentions accelerated to 37% from 17%, while recruitment intentions improved to 23% from 20%.

Richard Austin, head of manufacturing at BDO, said: “The improvement levels of investment we have seen for a second quarter in a row are hugely positive and are indicative of an industry that is confident of a future worth investing in.”

Stephen Phipson, chief executive of Make UK, the industry body, added: “Growth prospects continue to accelerate for manufacturers, as economies at home and abroad continue to open up.”

The positive trend was predicted to continue for the rest of the year, with a forecast balance of 53% for output in for fourth quarter.

But Make UK warned that momentum could be derailed if the recently announced rise in National Insurance contributions dampened growth and hit recruitment.

“After surviving an 18-month pandemic, the recent increase in National Insurance was the last thing the industry needed, especially when firms need capital to invest and hire,” argued Phipson.

Austin added that other “big challenges” remained for manufacturers. “Increasing costs, rising inflation and the ongoing battle to attract and retain skilled workers despite positive recruitment intentions will continue to stress-test UK makers for the remainder of the year.”

Make UK is forecasting growth for manufacturing of 7.1% this year, down slightly from an earlier estimate of 7.8%, and GDP growth of 7.3%.

Make UK and BDO surveyed 327 companies between 28 July and 17 August.