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Let the sun shine: it’s time for the manufacturing industry to flourish once again

POSTED: 6th May 2014
IN: Industry news
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It’s no secret that the past few years have been especially tough for the manufacturing sector in the UK: fiscal austerity, steadily declining exports and the outsourcing of skilled jobs, mainly to the Far East, have taken their toll.

The way we were: out in the cold…

It’s no secret that the past few years have been especially tough for the manufacturing sector in the UK: fiscal austerity, steadily declining exports and the outsourcing of skilled jobs, mainly to the Far East, have taken their toll. As recently as February, data from the Office for National Statistics (ONS) revealed that Britain’s goods exports have shrunk to £23.5bn, their lowest level since November 2010. This three-and-a-half year low was a particular blow to the Government, which was hoping to see the UK economy edge away from its reliance on consumer spending.undefined

Alongside the recent downturn, the industry has lingered under the widespread perception of terminal decline. Back in the 1950s, manufacturing in the UK employed 40 per cent of the workforce and accounted for a quarter of world manufacturing exports; these days, it employs a more modest 8 per cent and makes up just 11 per cent of GDP.

On the surface, these statistics make for rather gloomy reading but, if the manufacturing sector has proved anything over the years, it is how resilient it is. The industry survived crises in 1973, 1982 and 1991 and, while 2014 will continue to pose challenges, there are reasons to be optimistic as the sector continues to adapt and thrive.

Things are hotting up: optimism is in the air

In spite of the challenges faced by the industry, the UK is still the 11th largest manufacturing nation in the world and the sector remains vital to the economy. According to the latest figures from the ONS, manufacturing in the UK employs 2.6 million people with the average wage coming in at a healthy £30,000. That’s higher than the rest of the economy as a whole.

And that’s not all: the latest figures from a Confederation of British Industry (CBI) trends survey indicate that manufacturers are at their most optimistic about the future since Edward Heath’s government in 1973. It reports that 41 per cent of companies are more hopeful about the general business situation than three months ago with domestic and export order books beginning to show signs of rapid growth. In fact, the figures show the highest number of companies reporting an increase in orders since 1995. Commenting on the report, the CBI’s chief policy director, Katja Hall, says: “Our industrial base is seizing a bigger role in the UK’s economic recovery, with output, orders and hiring all on the up.”

Crucially, the report finds that the sector as a whole is remarkably upbeat about the prospects for the next quarter, with companies feeling more confident about investing in plant and machinery, product and process innovation as well as training.

This bourgeoning optimism is further backed up by ONS figures, with manufacturing output jumping by a more-than-expected 1 per cent - its highest level in more than two-and-a-half years, and 3.8 per cent higher than this time last year.

With confidence in the future at a 40-year high, it seems that manufacturers are also daring to hope for a turnaround in their export opportunities. The latest Business Trends Survey from the EEF shows that manufacturers’ expectations of future export orders have reached a record high, demonstrating the determination of the industry to thrive despite recent setbacks.

What’s more, this optimism and appetite for growth isn’t confined to big players such as the UK’s resurgent car industry: the latest Barometer Survey by the Manufacturing Advisory Service (MAS) finds that confidence in the economic recovery is gathering pace among manufacturing SMEs as well. Encouragingly, the MAS survey finds that such companies are planning millions of pounds of investment between now and 2015 in the clearest sign yet that the manufacturing renaissance could be here to stay.

Sowing the seeds of change – how manufacturing SMEs should embrace optimism

There is little doubt that a thriving – not just surviving – manufacturing industry is key to the UK’s continued economic recovery. But what can manufacturing SMEs do to capitalise on the growing optimism within the sector?

As with all manufacturing companies, growth, innovation and a robust strategy are the cornerstones to success and this is especially true for SMEs. Financing has been notoriously difficult during the downturn and relationships with the banking sector are still a work in progress. But if manufacturing SMEs are to take advantage of new opportunities and grow their businesses, they must continue to invest so that they are prepared to compete on the world stage.

According to the EEF, six in 10 manufacturers plan to increase their training budgets in the next two years and the MAS report confirms that more than half manufacturing SMEs intend to take on more staff.

This kind of grass-roots investment is vital if SMEs are to fulfill their expansion potential, not only by continuing to grow their export markets within the EU, but also further afield. A recent report by the Federation of Small Businesses (FSB) shows that more small firms than ever are planning to export, with a quarter of FSB members anticipating an increase in exports in the next three months.

Exporting to EU member states is relatively simple, but manufacturers must increase their reach to foreign markets if they wish to maximise growth. FSB national chairman John Allan says: “The UK’s export strategy must focus on matching a company’s export potential to the right overseas market. The majority of our members still export to the eurozone, but are increasingly looking to other dynamic markets such as China for opportunities.”

A challenge? Yes. But manufacturers are better placed than ever to be optimistic about their future and, for the first time in a while, it’s looking rather bright.

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