Make UK/BDO survey's manufacturing growth forecast doubles to outpace economy overall
15 Jun 2021
British manufacturing’s growth prospects have significantly improved, according to a major survey published today by Make UK and business advisory firm BDO.
After the substantial 10% decline in output in 2020, the sector looks set to recover a significant amount of that loss in 2021 and outpace the growth of the economy overall, thanks to a surge in both domestic and overseas orders which is translating into strong hiring intentions.
Make UK stressed that the figures represent a recovery from a very low base with balances last year reaching record lows worse than those seen during the financial crisis. Between 2019 and 2020 the manufacturing sector lost approximately £18 billion in value.Yet forecasts suggest output levels will return to pre-pandemic levels by the end of 2022.
Senior economist at Make UK Fhaheen Khan commented:
“Manufacturing growth is now firmly accelerating as restrictions have been eased and economies around the globe have started to open up. Looking forward there seems no reason to believe that this will not continue.
“However, we are coming from a very low base, worse than during the financial crisis.”
According to the survey the balance on output improved to +36% from +9% in Q1 which is the highest balance in the survey’s 30 year history. Output is expected to continue to improve with a forecast balance of +46% in Q3, which would be another record high.
Total orders also improved to +34% from +9%, with growth forecast to continue in Q3 with a balance of +36%. In contrast to the last quarter where there was a substantial divergence between domestic and export orders, both indicators showed significant growth in response to supply shortages and increases in the cost of raw materials and shipping costs.
Domestic orders increased from +6% to +27%, export orders recovered from a negative balance of -8% to +22%.
This surge in growth has also translated into strong recruitment intentions which exceeded expectations, improving from -6% to +20.
Make UK has upgraded its growth forecast for manufacturing from +3.9% to +7.8%, ahead of its forecast for GDP overall of +7.5%.
Its joint survey with BDO of 276 companies was conducted between 5 and 26 May.