Today we publish our third annual Executive Survey report, in partnership with Aldermore, which examines manufacturing executives' views about economic prospects, opportunities and risks for 2014.
So what are we seeing from the survey results? Confidence about the economy and manufacturing has improved from the muted picture seen at the beginning of 2013. The growth outlook from manufacturers is one of moderate expansion and quiet optimism.
As in previous surveys, manufacturers see opportunities in the next 12 months but are focusing their efforts against a backdrop of perceived continual global uncertainty. This should not prevent planned increases in investment from going ahead – critical to competitiveness and balanced growth in the UK.
Manufacturers are prepared for what the year ahead may throw at them by focusing efforts on strategies to boost their resilience, and therefore making growth expectations achievable.
Manufacturers' views expressed in our 2013 report have turned out pretty close to reality. Looking at last year, manufacturers expected, on balance, a very modest pick-up in UK economic conditions. At the industry level, a flat picture was the order of the day.
In reality, the domestic economy did see growth in every quarter to date through 2013, and looks set to end the year up 1.4%. Manufacturing output was flat in the first quarter of the year, but did see an improvement in Q2 and Q3. However, it is not expected to completely make up from the hangover of a poor end to 2012 and manufacturing will have shown a small contraction of about 0.1% in 2013.
What to expect in 2014
- Our quarterly Business Trends Survey at the end of 2013 showed a reasonably positive end to the year and firms expect that outlook to continue into the first few months of 2014.
- Considering the year ahead, manufacturers, on balance, expect growth in the UK economy and industry as well as globally.
- All sectors are on balance positive, in contrast with a year ago when differences between industry segments were very pronounced.
- There is also a view of overall modest increases in firm level attributes such as sales, profitability and employee numbers.
- The nature of growth is also expected to continue the changes seen in 2013 with more firms becoming confident about the domestic market.
- In addition, though manufacturers continue to be more optimistic about markets outside Europe, the mood on the eurozone has improved.
The all important investment plans
Investment intentions have been positive, but a massive gap remains with pre-recession levels of investment. We expect that this year we will see some of that ground being made up as two-fifths look to make moderate investments in new UK capacity. Some investment will inevitably take place overseas too.
Opportunities and challenges
In contrast to last year when manufacturers were looking to develop multiple growth opportunities, this year, the focus is set to be more targeted. Increasing sales to emerging markets comes top, but new product development and supply chain diversification are also set to provide growth opportunities.
However, a range of risks will persist into 2014 – the main concern is rising input costs, particularly energy, which impacts on competitiveness. Exchange rate volatility and rising pay pressures could also present clouds to the brighter outlook – however these have not changed significantly from past reports.
Actions to buffer against uncertainty
Uncertainty is the new normal for most and actions are being taken across the board to make sure manufacturers are prepared, resilient and flexible.
Productivity remains the watchword for the majority, and manufacturers are working closely with customers, suppliers and their workforce to ensure they can adapt and respond to new challenges.
We'll be blogging on all these areas in more depth throughout the week