As we head towards Christmas breaks and people opt for using up the last of their annual leave rather than work-related meetings, I thought I’d take the opportunity to reminisce about the year that’s nearly gone.
2016 hasn’t been short of hyperbole – it’s been historic and momentous; there have been seismic shifts; lots of people have resigned from stuff and there’s been more arguing than your average year. I’ll try to capture some of that in a series of blogs over the next week or so and remind readers of some of the other economic and manufacturing events of the year (those will mostly have nothing to do with Brexit. Or Trump).
Alarm bells sound in manufacturing over global economy (Daily Telegraph Jan 11th)
This was the headline generated by our first publication of the year – EEF’s Executive Survey 2016. Our fifth annual report on the outlook for manufacturing highlighted industry caution about the year ahead.
Manufacturers were expecting to be grappling with more risks that opportunities in 2016 – notably rising business costs, volatile exchange rates and uncertainty about the UK’s future relationship with the EU. Seems like many of our members were in possession of rather accurate crystal balls at the start of the year.
While companies were planning to do lots of good stuff, like investing in innovation and technology and entering new export markets, on balance manufacturers expected weaker exports, UK sales and employment than compared with the previous couple of years.
Elsewhere, January was also the last month in which an MPC member voted for an increase in Bank Rate.
This was when all things EU really started heating up – David Cameron went to Brussels to carve out a deal to assuage the British public's "frustrations" with the EU and ensure the UK will never be part of an EU "superstate". With everything that’s happened since, it’s a struggle to remember what was actually agreed ... but a bit of digging remind us what the UK could have won – an exclusion from future commitments to ever closer union; there was an agreement limiting in-work benefits to newly arrived migrant workers; a promise to reduce red tape and the introduction of a ‘red card mechanism’ for Member States on new rules.
Even though the reception was lukewarm, the date for the UK public to decide on EU membership was set for the 23rd June. And as we know now the PM was counting down his last five months in the job.
EEF responded with manufacturers’ verdict of the UK’s relationship with the EU. Over 60% of companies surveyed wanted to stay and 5% wanted out. We helpfully provided some industry-specific reasons for the sector’s support for membership.
This month it became clearer that the economic clouds weren’t shifting. In the first Super Thursday of the year, the MPC was taking a gloomier view of UK economic prospects. GDP growth forecasts for 2016 and 2017 were pared back and committee members were taking a less optimistic tone on the prospects for wage growth.
In February EEF went all 4IR! Technological change doesn’t stop for political events and EEF produced our first infographic on the fourth industrial revolution and what it means for UK manufacturers. This kicked off a programme of work I’ll come to later.
Finally, February is always a big month in the EEF calendar with our National Conference. 2016 was bigger and better (again) and you can see some of the proceedings here and book to come along in 2017 here.
One of the big industries stories that had been building since Autumn 2015 was the crisis in the UK steel sector. Faced with a storm of uncompetitive energy and other business costs and Chinese imports dumped in European markets, the industry had been feeling the strain. In March, the future of some UK production facilities together with employment in local communities looked to be under threat. And the UK Steel division at EEF was at the forefront of discussions with the UK government and European officials to find solutions that would secure a sustainable future for the industry.
Deal 'close' over sale of Tata steel mills (BBC Mar 23rd)
Confirming the caution about growth prospects from the wider manufacturing sector at the start of the year, our 2016q1 Manufacturing Outlook report continued to point to fairly sluggish trading conditions across many parts of industry. Headline output and orders balances remained in the red, but weren’t getting worse in the first quarter and there was little sign that manufacturers were about to splurge on a lot more new investment.
This latter point filtered through to the OBR’s economic assessment as they joined the Bank of England in taking a red pen to their economic forecasts, with the biggest downgrades made to outlook for business investment.
The public finances weren’t expected to get a whole better soon but the March Budget was nevertheless an opportunity for the government to act to address some of manufacturers concerns about rising business costs, get the proposed apprenticeship levy on the right track and make some long term decisions about the structure of the business tax system and future infrastructure investment.
We got a few hits, but also some misses, notably on reforms to business rates and any sense that the government had renewed their enthusiasm for industrial strategy.
Lots of people signed lots of letters about staying in and leaving the EU.
April’s a bit of a blur. We mainly talked about the EU referendum, as did everyone else, apart from a brief respite at the start of the month when we were distracted by some leaked documents revealing that a number of wealthy individuals were trying to minimise their tax liabilities by establishing offshore shell companies in Panama. I wonder what Mossack Fonseca are up to now.
Once that passed, lots of people got back to signing lots of letters about staying in and leaving the EU and then went to see Jungle Book.
That’s enough for one blog. More later in the week.