2015 Executive Survey - a roundup

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Today we have published, in partnership with Aldermore, our fourth annual EEF survey of executives’ views on the year ahead, and confidence about the economy and manufacturing in 2015 has weakened from the moderate outlook expected at the start of 2014.

 

Growth is anticipated by manufacturers across the UK economy and in manufacturing sectors, however, concerns about the global economic outlook have grown.

Whilst manufacturers see that the UK is a competitive location for their manufacturing, risks still loom on the horizon, from rising input costs to significant disruptions in major markets. Companies continue to prioritise activities to ensure they realise any growth prospects. The balance between risks and opportunities is a fine one, but manufacturers are confident they can achieve sales growth in the year ahead.

2014 in review

The manufacturing sector expected 2014 to be brighter than 2013 but the majority view was one of moderate improvement.

There was also the view of overall modest increases in firm level attributes such as sales, profitability and employee numbers. The nature of growth was similarly expected to continue the changes seen in 2013 with more firms becoming confident about the domestic market.

Manufacturers continued to be more optimistic about markets outside Europe, but the mood about the eurozone had improved. Against the backdrop of risks and possible global uncertainty, overall, manufacturers were quietly confident they could achieve growth in 2014 and end the year in a moderately better position.

Their confidence in the economic outlook was warranted. The UK economy expanded at a good pace through 2014 and manufacturing looks set to achieve its strongest rate of growth since 2010.

What to expect for 2015

Our latest survey shows that there is confidence that the positive trends of 2014 will remain, albeit the pace of growth companies are planning for is more modest and that feeling of optimism is less prevalent than it was this time last year.

The 2015 survey shows 37% of manufacturers expecting another year of improvement in the UK economy, with 17% expressing the view that deterioration in the outlook is more likely. Whilst this shows some difference from the figures of the 2014 survey, respondents remain more positive on the UK’s economic outlook going into 2015 than in either 2012 or 2013.

Overall, seven in ten manufacturers in our survey see the UK as a competitive location for their activities in 2015.

Manufacturers’ views of industry prospects in the year ahead have also moderated compared with a year ago. Over a third of companies forecast an improvement in industry conditions, a decrease from the 62% of respondents predicting growth in 2014.There are, however, variations in sentiment emerging from different manufacturing sub-sectors.

Firm level outlook varying across indicators

At the firm level, responses are once again more optimistic for the domestic demand outlook compared with export sales. An upbeat view remains from a majority of manufacturers on productivity improvements in the year ahead and activity levels should see industry create more jobs. However, standing out this year is the relatively weak picture on profitability.

In contrast to the UK and industry outlook, there is a lack of confidence in global economic prospects. Views on the eurozone fall back into negative territory and back to the level seen at the beginning of 2013, whilst North America and Asia are still seen as bright spots.

Strategies for growth but risks ahead too

Companies are putting in place strategies in response to a patchwork of opportunities, risks and uncertainties. These activities fall into three broad groups – efforts to differentiate, improvements to production processes and supplier relations, and entry into new business areas. Coming out on top are strategies which can enhance manufacturers competitive position in the market by bringing new product offerings to their customers and by raising the profile of their capabilities through increased marketing and branding activity.

A range of risks continue to be identified by manufacturers, with several areas seeing an increase in the proportion of respondents compared with last year’s survey figures. Rising input costs remain a concern for the largest proportion of manufacturers. Pressure on pay settlements, exchange rate risk, economic disruptions and cash flow risk all feed into manufacturers’ worries for the year ahead. With the same proportion agreeing that there are more risks than opportunities in the year ahead as disagreeing, there appears to be a fine balance for some companies in 2015.

 

We will be blogging on all of these areas in more detail throughout the week.

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Senior Policy Researcher

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