2016: year in review (part 3)

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This is the third and final instalment of my year in review. We’re talking about Brexit, the effects of Brexit on manufacturers’ costs and industrial strategy. But the year ends on some rather brighter news about UK manufacturing.

September

The month started with our 2016q3 Manufacturing Outlook report. So, back in the previous quarter manufacturers had been predicting a return to growth in the second half of the year, but shortly after confidence collapsed following the referendum. The reality of the third quarter was somewhere in between – confidence corrected somewhat, but it was a case of recovery delayed for another quarter.

16q3headlines

However, our survey and the official data showed that the fall in Sterling was quickly feeding through into hefty increases in input costs.

September also saw the launch of our updated manufacturing fact card – everything you wanted to know about UK manufacturing.

It wouldn’t be a month at EEF without a contribution to the debate on Brexit. While everyone now gets that Brexit means Brexit – we also outlined that Brexit should also mean things like fair movement of skills and tariff free access to the single market. Our Chief Executive set out his perspective.

And if all that was just too much, you could find a brief, yet informative distraction in my favourite pun-filled blog of the year.

October

Industrial strategy is BACK! Actually, it made its official return in July in a round of ‘machinery of government’ changes, which saw the creation of a new department for Business, Energy and Industrial Strategy. Even in October debate continued to rage about how it should be pronounced – ‘BAYS’, ‘BEES’, or just old-skool BIS?

Anyway, in his first speech as Secretary of State for the unpronounceable department, Greg Clark outlined his early thinking on what we all might expect from a new, ambitious industrial strategy.

'An upgrade in our infrastructure. An upgrade in the resilience – and the cleanness – of our energy supplies. An upgrade in our education and training. An upgrade in the development and regeneration of our towns and cities. Upwards to a country that invests. Upwards to a country of opportunity and of enterprise.'

I’m struggling to remember a time when EEF wasn’t calling for a coherent industrial strategy to address the need to rebalance the UK economy, improve productivity and cement long-term sustainable growth. In case anyone missed this, we added to our tally of reports with Manufacturing Ambitions. Our research with manufacturers showed the sector was not short of growth ambitions and had clear plans to innovate, develop new business models, collaborate with their supply chains and invest in new technology. The ambition of government's industrial strategy needs to match this and support the strategies of manufacturers.

Something else we'd been talking about for a while, was the need for a decision on additional aviation capacity in the South East of England. We'd been teased with promises of decisions before, but in October Heathrow finally got the official nod. So you think that's it for discussion about airports in the UK, think again....

Lastly, we also saw the first official estimate of economic activity in the quarter following the referendum. And the news was good. The UK economy proved to be resilient expanding by 0.5% in the three months to September. Thank you consumers.

 

2016-10-27-GDP-Q3-sectors-contrib

 

November

One of our most important tasks at EEF is to ensure we are on top of what's happening to trading conditions and business plans across UK manufacturing. Only by meeting with industry representatives and their participation in our survey programme can we represent what's happening in the sector and determine what action is needed for government to keep it competitive.

These efforts continued in November with our annual Investment Monitor. While official data was pointing to decent growth across the economy and business surveys were reporting strengthening confidence, the big question was whether there was enough confidence in the face of Brexit to keep investment going. Our pre- and post-referendum industry surveys indicated that the referendum outcome hadn't materially shifted investment plans for many companies in the next couple of years. While that's pretty good news, we're not getting carried away - a boom in investment doesn't look in prospect either.

And that view was shared by the Office for Budget Responsibility in its assessment of the UK's economic and fiscal outlook, published alongside the Autumn statement.

OBR-fcast-Nov-16 

 

And the Autumn statement was the main political event of the month. With a new Chancellor at the helm and fewer leaks to go on, this would be the first indication of the government's approach to supporting growth through the uncertain Brexit negotiations. You can see what EEF was calling for here. We were broadly positive about what we got - read why here.  

So earlier in the year we went all fourth industrial revolution. We'd spoken to businesses and experts to get a handle on what is was and the opportunities it could offer UK manufacturing. In November, we produced a 4IR primer aimed at businesses aiming to answer the big questions - is it a bird, is it a plane? No it's a three stage journey involving supply chain optimisation and connected products.

 

December

And we're on the home straight.

Before we began the pre-Christmas wind down manufacturers confirmed that a recovery in activity was now underway. Delayed from the third quarter, the final three months of the year brought some of the most upbeat Manufacturing Outlook survey results for some 18 months. The positive news didn't end with a pick up in output and orders - which were pretty broad based across industry - it continued with a rebound in investment and recruitment plans. These trends are expected to last at least into the early part of 2017 and prompted us to revise up our forecasts for manufacturing in 2017.  

MO-q416---Investment 

I'll end the year on that positive note. If you've worked through all three blogs and thought why on earth have you not mentioned the apprenticeship levy - fear not - there is a recap on all skills related developments in 2016 here.

I wish readers a restful Christmas break and we'll see you back here in 2017.  

Author

This person has now left EEF. Please contact us on 0808 168 1874 or email us at enquiries@eef.org.uk if you have any questions.

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