What Does 2017 Have in Store for UK Manufacturing?
2016 proved to be something of a testing year for Britain’s once legendary manufacturing industry. With the debate around the Brexit vote looming, UK manufacturing dealt with wave after wave of uncertainty, which only grew as we approached the 23rd of June.
What happened next has been well documented, but its effect on the UK manufacturing industry has been an interesting one.
The immediate collapse in the value of the pound meant that suddenly, buying products and materials from the UK became a much more attractive proposition, thanks to favourable exchange rates. This, in turn, spurred a sharp uptick in the fortunes of the industry, with both domestic and export orders rising and the industry as a whole creating jobs for the first time in a number of years.
Most recently, December brought with it the strongest PMI reading in two and a half years as the industry grew at an unexpectedly strong rate, hitting 56.1. That’s encouraged economists like Rob Dobson to suggest that the UK manufacturing industry “starts 2017 on a strong footing”, saying: “Based on its historical relationship against official manufacturing output data, the survey is signalling a quarterly pace of growth approaching 1.5%, a surprisingly robust pace given the lacklustre start to the year and the uncertainty surrounding the EU referendum.
Engineering and allied industries comprise the single largest sector, contributing total Gross Value Added in manufacturing in 2003. Within this sector, transport equipment was the largest contributor, with 8 global car manufacturers being present in the UK. These include British makers now owned by overseas companies such as BMW, Tata, Volkswagen and General Motors (Vauxhall Motors) and plants making vehicles under foreign ownership and branding such as Honda, Nissan and Toyota with a number of smaller, specialist manufacturers (including Lotus and Morgan) and commercial vehicle manufacturers (including Leyland Trucks, LDV, Alexander Dennis, JCB, the main global manufacturing plant for the Ford Transit, Manganese Bronze and Case-New Holland) also being present. The British motor industry also comprises numerous components for the sector, such as Ford’s diesel engine plant in Dagenham, which produces half of Ford’s diesel engines globally.
“The boost to competitiveness from the weak exchange rate has undoubtedly been a key driver of the recent turnaround, while the domestic market has remained a strong contributor to new business wins.”
So, with 2016 rounding off nicely for the industry, we ask what 2017 has in store for the industry? At this early stage, it’s hard to see beyond yet more uncertainty for the industry, courtesy of Brexit.
Ever since the UK voted to leave the UK in June, it’s been the Government’s policy not to comment on ongoing talks and negotiations.
Though initially prudent, the Government have retained that hard line stance to such an extent that nobody has much of an idea of what the Government hope to achieve during the negotiations.
Indeed, numerous leaks have emerged suggesting that infighting and a lack of vision have meant that the Government themselves don’t know which way to pull in talks.
Whilst bad for the Government, the lack of concrete information about the forthcoming separation from Europe has meant huge uncertainty in the manufacturing industry. Investments that were put on hold last year en masse are expected to remain on the shelf until we know our future place inside Europe’s free market.
Investment in the sector has been depressed for some time, and clarity on the UK’s negotiating goals would go some way to releasing that investment into the industry”.
It’s a view shared by Lewis Crowther, CEO at Custom Fittings, a leading UK manufacturer of BSP fittings. He said: “It’s clear to see within the industry that despite orders increasing from overseas, manufacturers are treating the uptick as the calm before the storm.