Optimism among smaller manufacturers improved this quarter, alongside steady employment growth, rising output and new domestic orders, according to recent figures released by the Confederation of British Industry (CBI). However, with the strength of the Pound against the Euro currently impacting on export orders and margins, manufacturers may need to look further afield for trade opportunities.
The state of play
According to the CBI survey of 445 firms, manufacturers have experienced a slower growth of new orders in the quarter leading up to July and collectively believe their competitiveness in the EU continues to fall sharply. Anna Leach, CBI Head of Economic Analysis, commented:
“Optimism among smaller manufacturers improved… But the relative strength of the Pound against the Euro is hitting export orders and margins, while uncertainty regarding Greece threatens growth prospects in the Eurozone.”
Meanwhile, while the US continues to be one of the most popular countries for British exporters, spending a total of £40.9bn in 2014, it also encountered one of the most significant drops in trade with the UK. Exports to France lost 11 per cent of their value while Netherlands has dropped eight per cent year-on-year.
Looking further afield for opportunities
With recent figures revealing that China currently occupies 6th place on the list of top UK export destinations, manufacturers could improve export growth by strengthening their relationship with buyers within the thriving Asian nation. Exports to China hit £13.9bn last year, a growth of 12 per cent from the previous year.
And recent UKTI research suggests that China might not be the only Asian continent offering export potential for UK businesses. With a population of over 620 million, the region of South East Asia boasts the world’s third largest consumer market and currently attracts more foreign investment than China. In addition, it has a combined domestic product in excess of £1.2 trillion and an impressive growth rate of six per cent annually.
Speaking about the outlook for UK manufacturing exports, Katja Hall, CBI Deputy Director-General, said: “Greater buoyancy in exports remains a missing element from the UK’s recovery. Nevertheless we’re encouraged by the Government’s commitment to take steps to address this as part of its productivity plan.
“Despite Sterling pressures and the challenging global backdrop, investment intentions remain above average, particularly in innovation and training.”
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