Favourable Forecast Must Be Seen In The Context Of Wider Outlook For UK Economy
A new survey forecasting a doubling of UK manufacturing growth this year must be seen in the context of the wider economic outlook, according to lawyers at Irwin Mitchell.
The latest Manufacturing Outlook Survey by Make UK and BDO suggests the sector will see a significant uptick throughout the rest of the year, following the 10% fall in output in 2020.
Manufacturing growth is projected to overtake the performance of the economy overall, thanks to increasing foreign and domestic orders, delivering a return to pre-pandemic output levels by the fourth quarter of 2022.
First quarter output improving from +9% to +36% was the highest output balance in the survey’s 30 year history; while total orders reached +34%. This is set to accelerate to +36% by Q3; with domestic orders set to rise from +6% to +27% and export orders will see -8% jump to +22%.
While good news, lawyers at Irwin Mitchell point out continued uncertainty is likely to make the overall recovery fragile this year. Much will depend on how long lockdown restrictions continue, and the effectiveness of COVID vaccines. Ongoing Brexit issues, as negotiations continue, grace periods end and further TCA deadlines approach also threaten the wider economic outlook.
Expert Opinion“This survey is welcome good news for the manufacturing sector. It does factor in vaccine effectiveness and while this looks the most likely scenario, the further delay to the lifting of all COVID restrictions shows that a certain amount of caution is still required after such an unprecedented and still uncertain period.
“The projection of a +46% output in the third quarter would be a record high and deliver a much needed shot the arm to the sector but with the qualifier that this growth is coming from a very low base.
“Between 2019 and 2020, the manufacturing sector lost £18bn in value, which will not be recovered overnight, even assuming the most favourable of circumstances ahead.
“There has also been a significant difference between domestic and export orders in the figures and while both are now expected to show significant growth, separate ONS figures show exports with Europe in Q1 of this year down a quarter on the position in 2019. This represents a cut in EU trade of 21% and while figures bounced back in February, it remains to be seen if this was only temporary, or an indication of better things to come.
“Assuming positive government negotiations with the EU, that restrictions lift on 19 July and global economies open up, there are plenty of reasons to be positive. Certain manufacturing sectors will doubtless perform better than others but the surge in recruitment and investment suggests the sector as a whole is confident in the future upward direction of travel.” Dorrien Peters - Partner