Make/BDO survey says recovery has begun from historic lows
22 Sep 2020
UK manufacturers are on “ the long road to recovery” but only after improvements in output and orders from the last quarter’s historic low, says a survey published jointly by Make UK and business consultants BDO.
Their latest Manufacturing Outlook Q3 survey shows the balances on output improved nut only to -36% from -56% of the last quarter. The latter was the lowest balance ever recorded in the 30 year history of the survey.
It also reveals that UK and export orders also improved from similarly historic lows to -36% and -34% respectively.
Surveyed companies expect the prospects for industry to continue improving with the balance forecast for output for the next three months put at -7%.
A major negative factor in the survey was the balance on investment intentions falling to -32% from -26% in the last quarter. Whilst not reaching the levels of cutbacks seen during the financial crisis as yet, the trend downwards is following a similar pattern to that seen at the time.
Worryingly, the balance in the first quarter was +20% – despite the greater political certainty that followed the general election.
Chief executive at Make UK Stephen Phipson said: “Manufacturing has begun to climb away from the abyss that it stared into earlier in the year. But, make no mistake it is going to be a long haul back towards normal trading conditions, with talk of a V shaped recovery nothing more than fanciful.
“Having emerged from three years of political uncertainty at the end of last year, increasing talk of a final ‘no deal’ exit from the EU would be a final nail in the coffin for many companies. If we are to avoid this and, the avalanche of job losses that would follow in already hard hit areas and sectors, it is essential that the first step towards a fuller recovery is provided by a comprehensive trade agreement with the EU.”
BDO head of manufacturing Tom Lawton warned that the fact that so many businesses are losing their appetite to invest is a real cause for concern.
“No-one is in any doubt about the financial challenges facing manufacturers, but failing to invest now will have serious medium to long term implications. The Government must be alive to this risk and provide the support required to help UK manufacturers through this transition period and beyond,” he explained.
“Other countries – Germany in particular – provide good examples of consistent long term support to their manufacturing sectors. The UK should look to adopt a similar approach.’
Despite the improvement in business conditions since the start of the crisis, the employment balance weakened since the last quarter, falling to -29% from -22%. This suggests manufacturers are cutting back on staff, though whether it means companies are adapting to the new environment by improving productivity with fewer staff remains to be seen.