South East Manufacturing Bounces Back as Clouds Lighten – Make UK/BDO survey
21st March 2023
Recession fears ease though significant growth remains elusive
South East manufacturers are seeing a rebound in activity in the first quarter of the year as the domestic and global markets have improved, easing fears of a significant recession for industry this year.
The findings in the Make UK/BDO Q1 Manufacturing Outlook survey show a marked pick up on the picture in the final quarter of 2022. The figures echo the gradual improvements in other data such as the UK and European PMIs which are now only just in negative territory, as well as a strong pick up in demand from China.
Most notably, the improvement is being largely driven by strong demand in the electronics sector which is one of the biggest sectors in the South East. According to Make UK and BDO, this could be due to a number of factors, including companies investing in digitalisation and extra capacity to counter labour shortages or, to take advantage of the final period of the super deduction scheme which ends this month. Demand for electronics goods is especially strong from overseas, in particular the EU.
Both output and orders picked up in the South East with an especially strong order balance of +33%. This was driven primarily by export orders (+30%) which reflects the significant demand in electronics from EU markets. On the back of this improving picture employers revised their intentions to both recruit and invest. Manufacturers in the South East are more confident about future prospects, with output and both UK and export orders predicted to increase further.
However, despite the improvement this quarter, Make UK is still cautioning against the worst of conditions being over and is still forecasting a contraction for manufacturing in 2023 as the substantial challenges the sector is facing show few signs of abating.
Jim Davison, South East Region Director at Make UK, said:
“Manufacturers in the South East have seen a rebound at the start of the year as conditions have improved in their major markets and, business confidence has improved. However, one swallow doesn’t make a summer and it is far too early to say the worst has passed given the significant challenges the economy faces.
“However, the Budget should help boost investment in the short to medium term although ideally, full expensing should be made permanent to better reflect the investment cycle for manufacturers.”
Mark Hutton, Head of Manufacturing at BDO in the South East, added:
“Despite some positive news, such as strong demand for electronics, inflationary pressures are still very evident for UK manufacturers with increased costs still being passed on. The worst of conditions for the sector may still be to come.
“Recent government announcements do little to reassure the sector. Manufacturers need certainty on a range of fronts, including long-term energy support and assistance to build a sustainable workforce.”
In terms of overall output this year Make UK is forecasting a contraction of -3.3% (a slight improvement from -4.4% forecast at the end of last year) and growth of just 0.8% in 2024.